REPORT TITLE:
Aquaculture; Wholesale Sales


DESCRIPTION:
Expands the "wholesaler" definition under the general excise tax
law to include sales to a commercial aquaculture producer or
cooperative of materials, supplies, or commodities, or the rental
or leasing of equipment, used by the commercial aquaculture
producer or cooperative in the production of aquaculture products
for sale.  (SB1427 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 1999                                H.D. 1
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO AQUACULTURE.



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

 1      SECTION 1.  The assessment of the general excise tax at the
 
 2 wholesale or retail rate for aquaculture producers appears to be
 
 3 determined arbitrarily, and is often detrimental to the
 
 4 profitable operation and expansion of aquaculture farms in
 
 5 Hawaii.  Many of the items needed in aquaculture production are
 
 6 often subject to the retail general excise tax rates when they
 
 7 should be treated as wholesale items.  The legislature finds that
 
 8 to help level the playing field for local producers with foreign
 
 9 and United States mainland aquaculture producers, the general
 
10 excise tax law should be clarified to ensure that the wholesale
 
11 transactions of aquaculture production are taxed at the wholesale
 
12 rate of one-half of one per cent rate.
 
13      The purpose of this Act is to clarify and include the
 
14 wholesale transactions of aquaculture production in the
 
15 definition of sales at wholesale.
 
16      SECTION 2.  Section 237-4, Hawaii Revised Statutes, is
 
17 amended to read as follows:
 
18      "§237-4 "Wholesaler", "jobber", defined."Wholesaler" or
 
19 "jobber" applies only to a person making sales at wholesale.
 

 
Page 2                                                     1427
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 1 Only the following are sales at wholesale:
 
 2      (1)  Sales to a licensed retail merchant, jobber, or other
 
 3           licensed seller for purposes of resale;
 
 4      (2)  Sales to a licensed manufacturer of material or
 
 5           commodities which are to be incorporated by the
 
 6           manufacturer into a finished or saleable product
 
 7           (including the container or package in which the
 
 8           product is contained) during the course of its
 
 9           preservation, manufacture, or processing, including
 
10           preparation for market, and which will remain in such
 
11           finished or saleable product in such form as to be
 
12           perceptible to the senses, which finished or saleable
 
13           product is to be sold and not otherwise used by the
 
14           manufacturer;
 
15      (3)  Sales to a licensed producer or cooperative association
 
16           of materials or commodities which are to be
 
17           incorporated by the producer or by the cooperative
 
18           association into a finished or saleable product which
 
19           is to be sold and not otherwise used by the producer or
 
20           cooperative association, including specifically
 
21           materials or commodities expended as essential to the
 
22           planting, growth, nurturing, and production of
 
23           commodities which are sold by the producer or by the
 

 
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 1           cooperative association;
 
 2      (4)  Sales to a licensed contractor, of material or
 
 3           commodities which are to be incorporated by the
 
 4           contractor into the finished work or project required
 
 5           by the contract and which will remain in such finished
 
 6           work or project in such form as to be perceptible to
 
 7           the senses;
 
 8      (5)  Sales to a licensed producer, or to a cooperative
 
 9           association described in section 237-23(a)(7) for sale
 
10           to such producer, or to a licensed person operating a
 
11           feed lot, of poultry or animal feed, hatching eggs,
 
12           semen, replacement stock, breeding services for the
 
13           purpose of raising or producing animal or poultry
 
14           products for disposition as described in section 237-5
 
15           or to be incorporated in a manufactured product as
 
16           described in paragraph (2) or for the purpose of
 
17           breeding, hatching, milking, or egg laying other than
 
18           for the customer's own consumption of the meat,
 
19           poultry, eggs, or milk so produced; provided that in
 
20           the case of a feed lot operator, only the segregated
 
21           cost of the feed furnished by the feed lot operator as
 
22           part of the feed lot operator's service to a licensed
 
23           producer of poultry or animals to be butchered or to a
 

 
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 1           cooperative association described in section
 
 2           237-23(a)(7) of such licensed producers shall be deemed
 
 3           to be a sale at wholesale; and provided further that
 
 4           any amount derived from the furnishing of feed lot
 
 5           services, other than the segregated cost of feed, shall
 
 6           be deemed taxable at the service business rate.  This
 
 7           paragraph shall not apply to the sale of feed for
 
 8           poultry or animals to be used for hauling,
 
 9           transportation, or sports purposes;
 
10      (6)  Sales to a licensed producer, or to a cooperative
 
11           association described in section 237-23(a)(7) for sale
 
12           to the producer, of seed for producing agricultural
 
13           products, or bait for catching fish (including the
 
14           catching of bait for catching fish), which agricultural
 
15           products or fish are to be disposed of as described in
 
16           section 237-5 or to be incorporated in a manufactured
 
17           product as described in paragraph (2);
 
18      (7)  Sales to a licensed producer, or to a cooperative
 
19           association described in section 237-23(a)(7) for sale
 
20           to such producer; of polypropylene shade cloth; of
 
21           polyfilm; of polyethylene film; of cartons and such
 
22           other containers, wrappers, and sacks, and binders to
 
23           be used for packaging eggs, vegetables, fruits, and
 

 
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 1           other agricultural products; of seedlings and cuttings
 
 2           for producing nursery plants; or of chick containers;
 
 3           which cartons and such other containers, wrappers, and
 
 4           sacks, binders, seedlings, cuttings, and containers are
 
 5           to be used as described in section 237-5, or to be
 
 6           incorporated in a manufactured product as described in
 
 7           paragraph (2);
 
 8      (8)  Sales of tangible personal property to a licensed
 
 9           person engaged in the service business; provided that
 
10           (A) the property is not consumed or incidental to the
 
11           performance of the services; (B) there is a resale of
 
12           the article at the retail rate of four per cent; and
 
13           (C) the resale of the article is separately charged or
 
14           billed by the person rendering the services;
 
15      (9)  Sales to a licensed leasing company of capital goods
 
16           which are thereafter leased as a service to others.
 
17           Capital goods means goods which have a depreciable life
 
18           and which are purchased by the leasing company for
 
19           lease to its customers[.]; and
 
20     (10)  Sales to a commercial aquaculture producer or
 
21           cooperative of materials, supplies, or commodities, or
 
22           the rental or leasing of equipment used by the
 
23           commercial aquaculture producer or cooperative in the
 

 
Page 6                                                     1427
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 1           production of aquaculture products for sale.  Sales
 
 2           under this paragraph shall include the rental or
 
 3           leasing of equipment, and the purchase of materials and
 
 4           supplies used in the construction, maintenance, or
 
 5           repair of ponds, raceways, tanks, wells, water and air
 
 6           delivery systems, water treatment, office, hatchery,
 
 7           laboratory, feed and equipment storage, processing, and
 
 8           packing facilities.  Sales at wholesale shall also
 
 9           include the sale of materials, supplies, or commodities
 
10           that are essential to the breeding, hatching, growth,
 
11           nurturing, health, production, harvesting, processing,
 
12           packing, and distribution of aquaculture products sold
 
13           by the commercial aquaculture producer or cooperative.
 
14      If the use tax law is finally held by a court of competent
 
15 jurisdiction to be unconstitutional or invalid insofar as it
 
16 purports to tax the use or consumption of tangible personal
 
17 property imported into the State in interstate or foreign
 
18 commerce or both, wholesalers and jobbers shall be taxed
 
19 thereafter under this chapter in accordance with the following
 
20 definition (which shall supersede the preceding paragraph
 
21 otherwise defining "wholesaler" or "jobber"):  "Wholesaler" or
 
22 "jobber" means a person, or a definitely organized division
 
23 thereof, definitely organized to render and rendering a general
 

 
Page 7                                                     1427
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 1 distribution service which buys and maintains at the person's
 
 2 place of business a stock or lines of merchandise which the
 
 3 person distributes; and which, through salespersons, advertising,
 
 4 or sales promotion devices, sells to licensed retailers, to
 
 5 institutional or licensed commercial or industrial users, in
 
 6 wholesale quantities and at wholesale rates.  A corporation
 
 7 deemed not to be carrying on a trade or business in this State
 
 8 under section 235-6 shall nevertheless be deemed to be a
 
 9 wholesaler and shall be subject to the tax imposed by this
 
10 chapter."
 
11      SECTION 3.  Statutory material to be repealed is bracketed.
 
12 New statutory material is underscored.
 
13      SECTION 4.  This Act shall take effect on July 1, 2000.