REPORT TITLE:
Taxation


DESCRIPTION:
Exempts from general excise tax: (1) goods and services exported
out of state; and (2)amounts prohibited from state taxation by
the Constitution of the United States or federal law.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                            188         
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO TAXATION. 


BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Chapter 237, Hawaii Revised Statutes, is amended
 
 2 by adding a new section to be appropriately designated and to
 
 3 read as follows:
 
 4      "§237-     Exemption for goods and services exported out
 
 5 of state.   (a) There shall be exempted from, and excluded from
 
 6 the measure of, taxes imposed by this chapter all of the value or
 
 7 gross proceeds derived from services performed in the State by a
 
 8 Hawaii service provider for an out-of-state customer where:
 
 9      (1)  The services performed in the State are exported and
 
10           resold, consumed, or used wholly outside the State; and
 
11      (2)  The gross income derived from the services performed
 
12           would otherwise be subject to taxation at the highest
 
13           rate under section 237-13(6), or (8), or equivalent
 
14           sections imposing the tax at the highest rate upon the
 
15           gross income derived from the rendering of services
 
16           under this chapter.
 
17      (b)  There shall be exempted from, and excluded from the
 
18 measure of, taxes imposed by this chapter all of the value or
 
19 gross proceeds derived from goods produced or manufactured in the
 
20 State by a Hawaii producer or manufacturer for an out-of-state
 
21 customer where:
 

 
Page 2                                         188         
                                     H.B. NO.           
                                                        
                                                        

 
 1      (1)  The goods are exported and resold, consumed, or used
 
 2           wholly outside the State; and
 
 3      (2)  The gross income derived from the goods would otherwise
 
 4           be subject to taxation under section 237-13(1), or (2),
 
 5           or equivalent sections imposing the tax upon the gross
 
 6           income derived from the production or manufacture of
 
 7           goods under this chapter.
 
 8      (c)  For the purposes of this section, the seller of goods
 
 9 or person rendering the services exported and resold, consumed,
 
10 or used outside the State shall take from the purchaser a
 
11 certificate (or an equivalent) in the form as the department
 
12 shall prescribe, certifying that the service or goods purchased
 
13 shall be resold or otherwise consumed or used outside the State.
 
14 Any purchaser who furnishes this certificate (or an equivalent
 
15 specified by the department) shall be obligated to pay the seller
 
16 of goods or person rendering the services, upon demand, if the
 
17 service or goods purchased shall not be resold or otherwise
 
18 consumed or used outside the State, the amount of the additional
 
19 tax which this chapter imposes upon the seller of goods or person
 
20 rendering the service."
 
21      SECTION 2.  Section 237-24.7, Hawaii Revised Statutes, is
 
22 amended to read as follows:
 

 
 
 
Page 3                                         188         
                                     H.B. NO.           
                                                        
                                                        

 
 1      §237-24.7  Additional amounts not taxable.  In addition to
 
 2 the amounts not taxable under section 237-24, this chapter shall
 
 3 not apply to:
 
 4      (1)  Amounts received by the operator of a hotel from the
 
 5           owner of the hotel in amounts equal to and which are
 
 6           disbursed by the operator for employee wages, salaries,
 
 7           payroll taxes, insurance premiums, and benefits,
 
 8           including retirement, vacation, sick pay, and health
 
 9           benefits.  As used in this paragraph:
 
10                "Employee" means employees directly engaged in the
 
11           day-to-day operation of the hotel and employed by the
 
12           operator.
 
13                "Hotel" means an operation licensed under section
 
14           445-92.
 
15                "Operator" means any person who, pursuant to a
 
16           written contract with the owner of a hotel, operates or
 
17           manages the hotel for the owner.
 
18                "Owner" means the fee owner or lessee under a
 
19           recorded lease of a hotel;
 
20      (2)  Amounts received by the operator of a county
 
21           transportation system operated under an operating
 
22           contract with a political subdivision, where the
 
23           political subdivision is the owner of the county
 

 
Page 4                                         188         
                                     H.B. NO.           
                                                        
                                                        

 
 1           transportation system.  As used in this paragraph:
 
 2                "County transportation system" means a mass
 
 3           transit system of motorized buses providing regularly
 
 4           scheduled transportation within a county.
 
 5                "Operating contract" or "contract" means a
 
 6           contract to operate and manage a political
 
 7           subdivision's county transportation system, which
 
 8           provides that:
 
 9           (A)  The political subdivision shall exercise
 
10                substantial control over all aspects of the
 
11                operator's operation;
 
12           (B)  The political subdivision controls the development
 
13                of transit policy, service planning, routes, and
 
14                fares; and
 
15           (C)  The operator develops in advance a draft budget in
 
16                the same format as prescribed for agencies of the
 
17                political subdivision.  The budget must be subject
 
18                to the same constraints and controls regarding the
 
19                lawful expenditure of public funds as any public
 
20                sector agency, and deviations from the budget must
 
21                be subject to approval by the appropriate
 
22                political subdivision officials involved in the
 
23                budgetary process.
 

 
Page 5                                         188         
                                     H.B. NO.           
                                                        
                                                        

 
 1                "Operator" means any person who, pursuant to an
 
 2           operating contract with a political subdivision,
 
 3           operates or manages a county transportation system.
 
 4                "Owner" means a political subdivision that owns or
 
 5           is the lessee of all the properties and facilities of
 
 6           the county transportation system (including buses, real
 
 7           estate, parking garages, fuel pumps, maintenance
 
 8           equipment, office supplies, etc.), and that owns all
 
 9           revenues derived therefrom;
 
10      (3)  Surcharge taxes on rental motor vehicles imposed by
 
11           chapter 251 and passed on and collected by persons
 
12           holding certificates of registration under that
 
13           chapter;
 
14      (4)  Amounts received by the operator of orchard properties
 
15           from the owner of the orchard property in amounts equal
 
16           to and which are disbursed by the operator for employee
 
17           wages, salaries, payroll taxes, insurance premiums, and
 
18           benefits, including retirement, vacation, sick pay, and
 
19           health benefits.  As used in this paragraph:
 
20                "Employee" means an employee directly engaged in
 
21           the day-to-day operations of the orchard properties and
 
22           employed by the operator.
 

 
 
 
Page 6                                         188         
                                     H.B. NO.           
                                                        
                                                        

 
 1                "Operator" means a producer who, pursuant to a
 
 2           written contract with the owner of the orchard
 
 3           property, operates or manages the orchard property for
 
 4           the owner where the property contains an area
 
 5           sufficient to make the undertaking economically
 
 6           feasible.
 
 7                "Orchard property" means any real property that is
 
 8           used to raise trees with a production life cycle of
 
 9           fifteen years or more producing fruits or nuts having a
 
10           normal period of development from the initial planting
 
11           to the first commercially saleable harvest of not less
 
12           than three years.
 
13                "Owner" means a fee owner or lessee under a
 
14           recorded lease of orchard property;
 
15      (5)  Taxes on nursing facility income imposed by chapter
 
16           346E and passed on and collected by operators of
 
17           nursing facilities;
 
18      (6)  Amounts received under property and casualty insurance
 
19           policies for damage or loss of inventory used in the
 
20           conduct of a trade or business located within the State
 
21           or a portion thereof that is declared a natural
 
22           disaster area by the governor pursuant to section
 
23           209-2;
 

 
Page 7                                         188         
                                     H.B. NO.           
                                                        
                                                        

 
 1      (7)  Amounts received as compensation by community
 
 2           organizations, school booster clubs, and nonprofit
 
 3           organizations under a contract with the chief election
 
 4           officer for the provision and compensation of precinct
 
 5           officials and other election-related personnel,
 
 6           services, and activities, pursuant to section 11-5;
 
 7      (8)  Interest received by a person domiciled outside the
 
 8           State from a trust company (as defined in section
 
 9           412:8-101) acting as payment agent or trustee on behalf
 
10           of the issuer or payees of an interest bearing
 
11           instrument or obligation, if the interest would not
 
12           have been subject to tax under this chapter if paid
 
13           directly to the person domiciled outside the State
 
14           without the use of a paying agent or trustee; provided
 
15           that if the interest would otherwise be taxable under
 
16           this chapter if paid directly to the person domiciled
 
17           outside the State, it shall not be exempt solely
 
18           because of the use of a Hawaii trust company as a
 
19           paying agent or trustee;
 
20      (9)  Amounts received by a management company from related
 
21           entities engaged in the business of selling interstate
 
22           or foreign common carrier telecommunications services
 
23           in amounts equal to and which are disbursed by the
 
24           management company for employee wages, salaries,
 

 
Page 8                                         188         
                                     H.B. NO.           
                                                        
                                                        

 
 1           payroll taxes, insurance premiums, and benefits,
 
 2           including retirement, vacation, sick pay, and health
 
 3           benefits.  As used in this paragraph:
 
 4                "Employee" means employees directly engaged in the
 
 5           day-to-day operation of related entities engaged in the
 
 6           business of selling interstate or foreign common
 
 7           carrier telecommunications services and employed by the
 
 8           management company.
 
 9                "Management company" means any person who,
 
10           pursuant to a written contract with a related entity
 
11           engaged in the business of selling interstate or
 
12           foreign common carrier telecommunications services,
 
13           provides managerial or operational services to that
 
14           entity.
 
15                "Related entities" means:
 
16                (A)  An affiliated group of corporations within
 
17                     the meaning of section 1504 (with respect to
 
18                     affiliated group defined) of the federal
 
19                     Internal Revenue Code of 1986, as amended;
 
20                (B)  A controlled group of corporations within the
 
21                     meaning of section 1563 (with respect to
 
22                     definitions and special rules) of the federal
 
23                     Internal Revenue Code of 1986, as amended; or
 

 
Page 9                                         188         
                                     H.B. NO.           
                                                        
                                                        

 
 1                (C)  Those entities connected through ownership of
 
 2                     at least eighty per cent of the total value
 
 3                     of each such entity, including partnerships,
 
 4                     associations, trusts, S corporations,
 
 5                     nonprofit corporations, or any other group or
 
 6                     combination of these or other tax entities
 
 7                     acting as a business unit;
 
 8                whether or not the entity is located within or
 
 9                without the State or licensed under this chapter;
 
10                [and]
 
11     (10)  Amounts received as grants under section 206M-15[.];
 
12           and
 
13     (11)  Amounts that the Constitution or law of the United
 
14           States prohibits the State from taxing."
 
15      SECTION 3.  Statutory material to be repealed is bracketed.
 
16 New statutory material is underscored.
 
17      SECTION 4.  This Act shall take effect on July 1, 1999.
 
18 
 
19                           INTRODUCED BY:  _______________________