REPORT TITLE:
GET; Pyramiding Acceleration


DESCRIPTION:
Accelerates the statutory reduction of the GET.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           2097
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO THE GENERAL EXCISE TAX.



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

 1      SECTION 1.  Section 237-4, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (a) to read as follows:
 
 3      "(a)  "Wholesaler" or "jobber" applies only to a person
 
 4 making sales at wholesale.  Only the following are sales at
 
 5 wholesale:
 
 6      (1)  Sales to a licensed retail merchant, jobber, or other
 
 7           licensed seller for purposes of resale;
 
 8      (2)  Sales to a licensed manufacturer of materials or
 
 9           commodities that are to be incorporated by the
 
10           manufacturer into a finished or saleable product
 
11           (including the container or package in which the
 
12           product is contained) during the course of its
 
13           preservation, manufacture, or processing, including
 
14           preparation for market, and that will remain in such
 
15           finished or saleable product in such form as to be
 
16           perceptible to the senses, which finished or saleable
 
17           product is to be sold and not otherwise used by the
 
18           manufacturer;
 
19      (3)  Sales to a licensed producer or cooperative association
 

 
Page 2                                                     
                                     S.B. NO.           2097
                                                        
                                                        

 
 1           of materials or commodities that are to be incorporated
 
 2           by the producer or by the cooperative association into
 
 3           a finished or saleable product that is to be sold and
 
 4           not otherwise used by the producer or cooperative
 
 5           association, including specifically materials or
 
 6           commodities expended as essential to the planting,
 
 7           growth, nurturing, and production of commodities that
 
 8           are sold by the producer or by the cooperative
 
 9           association;
 
10      (4)  Sales to a licensed contractor, of materials or
 
11           commodities that are to be incorporated by the
 
12           contractor into the finished work or project required
 
13           by the contract and that will remain in such finished
 
14           work or project in such form as to be perceptible to
 
15           the senses;
 
16      (5)  Sales to a licensed producer, or to a cooperative
 
17           association described in section 237-23(a)(7) for sale
 
18           to a licensed producer, or to a licensed person
 
19           operating a feed lot, of poultry or animal feed,
 
20           hatching eggs, semen, replacement stock, breeding
 
21           services for the purpose of raising or producing animal
 
22           or poultry products for disposition as described in
 
23           section 237-5 or for incorporation into a manufactured
 

 
Page 3                                                     
                                     S.B. NO.           2097
                                                        
                                                        

 
 1           product as described in paragraph (2) or for the
 
 2           purpose of breeding, hatching, milking, or egg laying
 
 3           other than for the customer's own consumption of the
 
 4           meat, poultry, eggs, or milk so produced; provided that
 
 5           in the case of a feed lot operator, only the segregated
 
 6           cost of the feed furnished by the feed lot operator as
 
 7           part of the feed lot operator's service to a licensed
 
 8           producer of poultry or animals to be butchered or to a
 
 9           cooperative association described in section
 
10           237-23(a)(7) of such licensed producers shall be deemed
 
11           to be a sale at wholesale; and provided further that
 
12           any amount derived from the furnishing of feed lot
 
13           services, other than the segregated cost of feed, shall
 
14           be deemed taxable at the service business rate.  This
 
15           paragraph shall not apply to the sale of feed for
 
16           poultry or animals to be used for hauling,
 
17           transportation, or sports purposes;
 
18      (6)  Sales to a licensed producer, or to a cooperative
 
19           association described in section 237-23(a)(7) for sale
 
20           to the producer, of seed for producing agricultural
 
21           products, or bait for catching fish (including the
 
22           catching of bait for catching fish), which agricultural
 
23           products or fish are to be disposed of as described in
 

 
Page 4                                                     
                                     S.B. NO.           2097
                                                        
                                                        

 
 1           section 237-5 or to be incorporated in a manufactured
 
 2           product as described in paragraph (2);
 
 3      (7)  Sales to a licensed producer, or to a cooperative
 
 4           association described in section 237-23(a)(7) for sale
 
 5           to such producer; of polypropylene shade cloth; of
 
 6           polyfilm; of polyethylene film; of cartons and such
 
 7           other containers, wrappers, and sacks, and binders to
 
 8           be used for packaging eggs, vegetables, fruits, and
 
 9           other agricultural products; of seedlings and cuttings
 
10           for producing nursery plants; or of chick containers;
 
11           which cartons and such other containers, wrappers, and
 
12           sacks, binders, seedlings, cuttings, and containers are
 
13           to be used as described in section 237-5, or to be
 
14           incorporated in a manufactured product as described in
 
15           paragraph (2);
 
16                                                 17           (A)  To a licensed seller engaged in a service business
 
18                or calling; provided that:
 
19                (i)  The property is not consumed or incidental to
 
20                     the performance of the services;
 
21               (ii)  There is a resale of the article at the
 
22                     retail rate of four per cent; and
 
23              (iii)  The resale of the article is separately
 

 
 
 
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                                     S.B. NO.           2097
                                                        
                                                        

 
 1                     charged or billed by the person rendering the
 
 2                     services; and
 
 3           (B)  Where:
 
 4                (i)  Tangible personal property is sold upon the
 
 5                     order or request of a licensed seller for the
 
 6                     purpose of rendering a service in the course
 
 7                     of the person's service business or calling
 
 8                     or upon the order or request of a person,
 
 9                     subject to tax under section 237D-2, for the
 
10                     purpose of furnishing transient
 
11                     accommodations;
 
12               (ii)  The property becomes or is used as an
 
13                     identifiable element of the service rendered;
 
14                     and
 
15              (iii)  The cost of the property does not constitute
 
16                     overhead to the licensed seller;
 
17           the sale shall be subject to section 237-13.3.
 
18           Where the taxpayer is subject to both subparagraphs (A)
 
19           and (B), then the taxpayer shall be taxed under
 
20           subparagraph (A).  Subparagraph (A) shall be repealed
 
21           on January 1, [2006.] 2002.
 
22      (9)  Sales to a licensed leasing company of capital goods
 
23           that have a depreciable life, are purchased by the
 

 
Page 6                                                     
                                     S.B. NO.           2097
                                                        
                                                        

 
 1           leasing company for lease to its customers, and are
 
 2           thereafter leased as a service to others;
 
 3     (10)  Sales of services to a licensed seller engaging in a
 
 4           business or calling whenever:
 
 5           (A)  Either:
 
 6                (i)  In the context of a service-to-service
 
 7                     transaction, a service is rendered upon the
 
 8                     order or request of a licensed seller for the
 
 9                     purpose of rendering another service in the
 
10                     course of the seller's service business or
 
11                     calling;
 
12               (ii)  In the context of a service-to-goods
 
13                     transaction, a service is rendered upon the
 
14                     order or request of a licensed seller for the
 
15                     purpose of manufacturing, producing,
 
16                     preparing, or acquiring tangible personal
 
17                     property to be sold;
 
18              (iii)  In the context of a services-to-contracting
 
19                     transaction, a service is rendered upon the
 
20                     order or request of a licensed contractor as
 
21                     defined in section 237-6 for the purpose of
 
22                     assisting that licensed contractor in
 
23                     executing a contract; or
 

 
Page 7                                                     
                                     S.B. NO.           2097
                                                        
                                                        

 
 1               (iv)  In the context of a services-to-transient
 
 2                     accommodations rental transaction, a service
 
 3                     is rendered upon the order or request of a
 
 4                     person subject to tax under section 237D-2
 
 5                     for the purpose of furnishing transient
 
 6                     accommodations;
 
 7           (B)  The benefit of the service passes to the customer
 
 8                of the licensed seller, licensed contractor, or
 
 9                person furnishing transient accommodations as an
 
10                identifiable element of the other service or
 
11                property to be sold, the contracting, or the
 
12                furnishing of transient accommodations; and
 
13           (C)  The cost of the service does not constitute
 
14                overhead to the licensed seller, licensed
 
15                contractor, or person furnishing transient
 
16                accommodations.
 
17           Sales subject to this paragraph shall be subject to
 
18           section 237-13.3;
 
19     (11)  Sales to a licensed retail merchant, jobber, or other
 
20           licensed seller of bulk condiments or prepackaged
 
21           single-serving packets of condiments that are provided
 
22           to customers by the licensed retail merchant, jobber,
 
23           or other licensed seller; and
 

 
Page 8                                                     
                                     S.B. NO.           2097
                                                        
                                                        

 
 1     (12)  Sales to a licensed retail merchant, jobber, or other
 
 2           licensed seller of tangible personal property that will
 
 3           be incorporated or processed by the licensed retail
 
 4           merchant, jobber, or other licensed seller into a
 
 5           finished or saleable product during the course of its
 
 6           preparation for market (including disposable,
 
 7           nonreturnable containers, packages, or wrappers, in
 
 8           which the product is contained and that are generally
 
 9           known and most commonly used to contain food or
 
10           beverage for transfer or delivery), and which finished
 
11           or saleable product is to be sold and not otherwise
 
12           used by the licensed retail merchant, jobber, or other
 
13           licensed seller."
 
14      SECTION 2.  Section 237-13, Hawaii Revised Statutes, is
 
15 amended to read as follows:
 
16      "§237-13  Imposition of tax.  There is hereby levied and
 
17 shall be assessed and collected annually privilege taxes against
 
18 persons on account of their business and other activities in the
 
19 State measured by the application of rates against values of
 
20 products, gross proceeds of sales, or gross income, whichever is
 
21 specified, as follows:
 
22      (1)  Tax on manufacturers.
 
23           (A)  Upon every person engaging or continuing within
 

 
Page 9                                                     
                                     S.B. NO.           
                                                        
                                                        

 
 1                the State in the business of manufacturing,
 
 2                including compounding, canning, preserving,
 
 3                packing, printing, publishing, milling,
 
 4                processing, refining, or preparing for sale,
 
 5                profit, or commercial use, either directly or
 
 6                through the activity of others, in whole or in
 
 7                part, any article or articles, substance or
 
 8                substances, commodity or commodities, the amount
 
 9                of the tax to be equal to the value of the
 
10                articles, substances, or commodities,
 
11                manufactured, compounded, canned, preserved,
 
12                packed, printed, milled, processed, refined, or
 
13                prepared for sale, as shown by the gross proceeds
 
14                derived from the sale thereof by the manufacturer
 
15                or person compounding, preparing, or printing
 
16                them, multiplied by one-half of one per cent.
 
17           (B)  The measure of the tax on manufacturers is the
 
18                value of the entire product for sale, regardless
 
19                of the place of sale or the fact that deliveries
 
20                may be made to points outside the State.
 
21           (C)  If any person liable for the tax on manufacturers
 
22                ships or transports the person's product, or any
 
23                part thereof, out of the State, whether in a
 

 
Page 10                                                    
                                     S.B. NO.           
                                                        
                                                        

 
 1                finished or unfinished condition, or sells the
 
 2                same for delivery to points outside the State (for
 
 3                example, consigned to a mainland purchaser via
 
 4                common carrier f.o.b. Honolulu), the value of the
 
 5                products in the condition or form in which they
 
 6                exist immediately before entering interstate or
 
 7                foreign commerce, determined as hereinafter
 
 8                provided, shall be the basis for the assessment of
 
 9                the tax imposed by this paragraph.  This tax shall
 
10                be due and payable as of the date of entry of the
 
11                products into interstate or foreign commerce,
 
12                whether the products are then sold or not.  The
 
13                department shall determine the basis for
 
14                assessment, as provided by this paragraph, as
 
15                follows:
 
16                (i)  If the products at the time of their entry
 
17                     into interstate or foreign commerce already
 
18                     have been sold, the gross proceeds of sale,
 
19                     less the transportation expenses, if any,
 
20                     incurred in realizing the gross proceeds for
 
21                     transportation from the time of entry of the
 
22                     products into interstate or foreign commerce,
 
23                     including insurance and storage in transit,
 

 
Page 11                                                    
                                     S.B. NO.           
                                                        
                                                        

 
 1                     shall be the measure of the value of the
 
 2                     products;
 
 3               (ii)  If the products have not been sold at the
 
 4                     time of their entry into interstate or
 
 5                     foreign commerce, and in cases governed by
 
 6                     clause (i) in which the products are sold
 
 7                     under circumstances such that the gross
 
 8                     proceeds of sale are not indicative of the
 
 9                     true value of the products, the value of the
 
10                     products constituting the basis for
 
11                     assessment shall correspond as nearly as
 
12                     possible to the gross proceeds of sales for
 
13                     delivery outside the State, adjusted as
 
14                     provided in clause (i), or if sufficient data
 
15                     are not available, sales in the State, of
 
16                     similar products of like quality and
 
17                     character and in similar quantities, made by
 
18                     the taxpayer (unless not indicative of the
 
19                     true value) or by others.  Sales outside the
 
20                     State, adjusted as provided in clause (i),
 
21                     may be considered when they constitute the
 
22                     best available data.  The department shall
 
23                     prescribe uniform and equitable rules for
 

 
Page 12                                                    
                                     S.B. NO.           
                                                        
                                                        

 
 1                     ascertaining the values;
 
 2              (iii)  At the election of the taxpayer and with the
 
 3                     approval of the department, the taxpayer may
 
 4                     make the taxpayer's returns under clause (i)
 
 5                     even though the products have not been sold
 
 6                     at the time of their entry into interstate or
 
 7                     foreign commerce; and
 
 8               (iv)  In all cases in which products leave the
 
 9                     State in an unfinished condition, the basis
 
10                     for assessment shall be adjusted so as to
 
11                     deduct the portion of the value as is
 
12                     attributable to the finishing of the goods
 
13                     outside the State.
 
14      (2)  Tax on business of selling tangible personal property;
 
15           producing.
 
16           (A)  Upon every person engaging or continuing in the
 
17                business of selling any tangible personal property
 
18                whatsoever (not including, however, bonds or other
 
19                evidence of indebtedness, or stocks), there is
 
20                likewise hereby levied, and shall be assessed and
 
21                collected, a tax equivalent to four per cent of
 
22                the gross proceeds of sales of the business;
 
23                provided that insofar as certain retailing is
 

 
Page 13                                                    
                                     S.B. NO.           
                                                        
                                                        

 
 1                taxed by section 237-16, the tax shall be that
 
 2                levied by section 237-16, and in the case of a
 
 3                wholesaler, the tax shall be equal to one-half of
 
 4                one per cent of the gross proceeds of sales of the
 
 5                business and provided that insofar as the sales of
 
 6                tangible personal property is a wholesale sale
 
 7                under section 237-4(a)(8)(B) the sale shall be
 
 8                subject to section 237-13.3.  Upon every person
 
 9                engaging or continuing within this State in the
 
10                business of a producer, the tax shall be equal to
 
11                one-half of one per cent of the gross proceeds of
 
12                sales of the business, or the value of the
 
13                products, for sale, if sold for delivery outside
 
14                the State or shipped or transported out of the
 
15                State, and the value of the products shall be
 
16                determined in the same manner as the value of
 
17                manufactured products covered in the cases under
 
18                paragraph (1)(C).
 
19           (B)  Gross proceeds of sales of tangible property in
 
20                interstate and foreign commerce shall constitute a
 
21                part of the measure of the tax imposed on persons
 
22                in the business of selling tangible personal
 
23                property, to the extent, under the conditions, and
 

 
Page 14                                                    
                                     S.B. NO.           
                                                        
                                                        

 
 1                in accordance with the provisions of the
 
 2                Constitution of the United States and the Acts of
 
 3                the Congress of the United States which may be now
 
 4                in force or may be hereafter adopted, and whenever
 
 5                there occurs in the State an activity to which,
 
 6                under the Constitution and Acts of Congress, there
 
 7                may be attributed gross proceeds of sales, the
 
 8                gross proceeds shall be so attributed.
 
 9           (C)  No manufacturer or producer, engaged in such
 
10                business in the State and selling the
 
11                manufacturer's or producer's products for delivery
 
12                outside of the State (for example, consigned to a
 
13                mainland purchaser via common carrier f.o.b.
 
14                Honolulu), shall be required to pay the tax
 
15                imposed in this chapter for the privilege of so
 
16                selling the products, and the value or gross
 
17                proceeds of sales of the products shall be
 
18                included only in determining the measure of the
 
19                tax imposed upon the manufacturer or producer.
 
20           (D)  When a manufacturer or producer, engaged in such
 
21                business in the State, also is engaged in selling
 
22                the manufacturer's or producer's products in the
 
23                State at wholesale, retail, or in any other
 

 
Page 15                                                    
                                     S.B. NO.           
                                                        
                                                        

 
 1                manner, the tax for the privilege of engaging in
 
 2                the business of selling the products in the State
 
 3                shall apply to the manufacturer or producer as
 
 4                well as the tax for the privilege of manufacturing
 
 5                or producing in the State, and the manufacturer or
 
 6                producer shall make the returns of the gross
 
 7                proceeds of the wholesale, retail, or other sales
 
 8                required for the privilege of selling in the
 
 9                State, as well as making the returns of the value
 
10                or gross proceeds of sales of the products
 
11                required for the privilege of manufacturing or
 
12                producing in the State.  The manufacturer or
 
13                producer shall pay the tax imposed in this chapter
 
14                for the privilege of selling its products in the
 
15                State, and the value or gross proceeds of sales of
 
16                the products, thus subjected to tax, may be
 
17                deducted insofar as duplicated as to the same
 
18                products by the measure of the tax upon the
 
19                manufacturer or producer for the privilege of
 
20                manufacturing or producing in the State; except
 
21                that no producer of agricultural products who
 
22                sells the products to a purchaser who will process
 
23                the products outside the State shall be required
 

 
Page 16                                                    
                                     S.B. NO.           
                                                        
                                                        

 
 1                to pay the tax imposed in this chapter for the
 
 2                privilege of producing or selling those products.
 
 3           (E)  A taxpayer selling to a federal cost-plus
 
 4                contractor may make the election provided for by
 
 5                paragraph (3)(C), and in that case the tax shall
 
 6                be computed pursuant to the election,
 
 7                notwithstanding this paragraph or paragraph (1) to
 
 8                the contrary.
 
 9           (F)  The department, by rule, may require that a seller
 
10                take from the purchaser of tangible personal
 
11                property a certificate, in a form prescribed by
 
12                the department, certifying that the sale is a sale
 
13                at wholesale; provided that:
 
14                (i)  Any purchaser who furnishes a certificate
 
15                     shall be obligated to pay to the seller, upon
 
16                     demand, the amount of the additional tax that
 
17                     is imposed upon the seller whenever the sale
 
18                     in fact is not at wholesale; and
 
19               (ii)  The absence of a certificate in itself shall
 
20                     give rise to the presumption that the sale is
 
21                     not at wholesale unless the sales of the
 
22                     business are exclusively at wholesale.
 
23      (3)  Tax upon contractors.
 

 
Page 17                                                    
                                     S.B. NO.           
                                                        
                                                        

 
 1           (A)  Upon every person engaging or continuing within
 
 2                the State in the business of contracting, the tax
 
 3                shall be equal to four per cent of the gross
 
 4                income of the business; provided that insofar as
 
 5                the business of contracting is taxed by section
 
 6                237-16, which relates to certain retailing, the
 
 7                tax shall be that levied by section 237-16.
 
 8           (B)  In computing the tax levied under this paragraph
 
 9                or section 237-16, there shall be deducted from
 
10                the gross income of the taxpayer so much thereof
 
11                as has been included in the measure of the tax
 
12                levied under subparagraph (A) or section 237-16,
 
13                on:
 
14                (i)  Another taxpayer who is a contractor, as
 
15                     defined in section 237-6;
 
16               (ii)  A specialty contractor, duly licensed by the
 
17                     department of commerce and consumer affairs
 
18                     pursuant to section 444-9, in respect of the
 
19                     specialty contractor's business; or
 
20              (iii)  A specialty contractor who is not licensed by
 
21                     the department of commerce and consumer
 
22                     affairs pursuant to section 444-9, but who
 
23                     performs contracting activities on federal
 

 
Page 18                                                    
                                     S.B. NO.           
                                                        
                                                        

 
 1                     military installations and nowhere else in
 
 2                     this State;
 
 3                but any person claiming a deduction under this
 
 4                paragraph shall be required to show in the
 
 5                person's return the name and general excise number
 
 6                of the person paying the tax on the amount
 
 7                deducted by the person.
 
 8           (C)  In computing the tax levied under this paragraph
 
 9                against any federal cost-plus contractor, there
 
10                shall be excluded from the gross income of the
 
11                contractor so much thereof as fulfills the
 
12                following requirements:
 
13                (i)  The gross income exempted shall constitute
 
14                     reimbursement of costs incurred for
 
15                     materials, plant, or equipment purchased from
 
16                     a taxpayer licensed under this chapter, not
 
17                     exceeding the gross proceeds of sale of the
 
18                     taxpayer on account of the transaction; and
 
19               (ii)  The taxpayer making the sale shall have
 
20                     certified to the department that the taxpayer
 
21                     is taxable with respect to the gross proceeds
 
22                     of the sale, and that the taxpayer elects to
 
23                     have the tax on gross income computed the
 

 
Page 19                                                    
                                     S.B. NO.           
                                                        
                                                        

 
 1                     same as upon a sale to the state government.
 
 2           (D)  A person who, as a business or as a part of a
 
 3                business in which the person is engaged, erects,
 
 4                constructs, or improves any building or structure,
 
 5                of any kind or description, or makes, constructs,
 
 6                or improves any road, street, sidewalk, sewer, or
 
 7                water system, or other improvements on land held
 
 8                by the person (whether held as a leasehold, fee
 
 9                simple, or otherwise), upon the sale or other
 
10                disposition of the land or improvements, even if
 
11                the work was not done pursuant to a contract,
 
12                shall be liable to the same tax as if engaged in
 
13                the business of contracting, unless the person
 
14                shows that at the time the person was engaged in
 
15                making the improvements the person intended, and
 
16                for the period of at least one year after
 
17                completion of the building, structure, or other
 
18                improvements the person continued to intend to
 
19                hold and not sell or otherwise dispose of the land
 
20                or improvements.  The tax in respect of the
 
21                improvements shall be measured by the amount of
 
22                the proceeds of the sale or other disposition that
 
23                is attributable to the erection, construction, or
 

 
Page 20                                                    
                                     S.B. NO.           
                                                        
                                                        

 
 1                improvement of such building or structure, or the
 
 2                making, constructing, or improving of the road,
 
 3                street, sidewalk, sewer, or water system, or other
 
 4                improvements.  The measure of tax in respect of
 
 5                the improvements shall not exceed the amount which
 
 6                would have been taxable had the work been
 
 7                performed by another, subject as in other cases to
 
 8                the deductions allowed by subparagraph (B).  Upon
 
 9                the election of the taxpayer, this paragraph may
 
10                be applied notwithstanding that the improvements
 
11                were not made by the taxpayer, or were not made as
 
12                a business or as a part of a business, or were
 
13                made with the intention of holding the same.
 
14                However, this paragraph shall not apply in respect
 
15                of any proceeds that constitute or are in the
 
16                nature of rent; all such gross income shall be
 
17                taxable under paragraph (9); provided that insofar
 
18                as the business of renting or leasing real
 
19                property under a lease is taxed under section
 
20                237-16.5, the tax shall be levied by section
 
21                237-16.5.
 
22      (4)  Tax upon theaters, amusements, radio broadcasting
 
23           stations, etc.  Upon every person engaging or
 

 
Page 21                                                    
                                     S.B. NO.           
                                                        
                                                        

 
 1           continuing within the State in the business of
 
 2           operating a theater, opera house, moving picture show,
 
 3           vaudeville, amusement park, dance hall, skating rink,
 
 4           radio broadcasting station, or any other place at which
 
 5           amusements are offered to the public, the tax shall be
 
 6           equal to four per cent of the gross income of the
 
 7           business.
 
 8      (5)  Tax upon sales representatives, etc.  Upon every person
 
 9           classified as a representative or purchasing agent
 
10           under section 237-1, engaging or continuing within the
 
11           State in the business of performing services for
 
12           another, other than as an employee, there is likewise
 
13           hereby levied and shall be assessed and collected a tax
 
14           equal to four per cent of the commissions and other
 
15           compensation attributable to the services so rendered
 
16           by the person.
 
17      (6)  Tax on service business.
 
18           (A)  Upon every person engaging or continuing within
 
19                the State in any service business or calling
 
20                including professional services not otherwise
 
21                specifically taxed under this chapter, there is
 
22                likewise hereby levied and shall be assessed and
 
23                collected a tax equal to four per cent of the
 

 
Page 22                                                    
                                     S.B. NO.           
                                                        
                                                        

 
 1                gross income of the business, and in the case of a
 
 2                wholesaler under section 237-4(a)(10), the tax
 
 3                shall be equal to one-half of one per cent of the
 
 4                gross income of the business.  Sales subject to
 
 5                this subparagraph shall be subject to section 237-
 
 6                13.3.
 
 7           (B)  The department, by rule, may require that the
 
 8                person rendering a service at wholesale take from
 
 9                the licensed seller a certificate, in a form
 
10                prescribed by the department, certifying that the
 
11                sale is a sale at wholesale; provided that:
 
12                (i)  Any licensed seller who furnishes a
 
13                     certificate shall be obligated to pay to the
 
14                     person rendering the service, upon demand,
 
15                     the amount of additional tax that is imposed
 
16                     upon the seller whenever the sale is not at
 
17                     wholesale; and
 
18               (ii)  The absence of a certificate in itself shall
 
19                     give rise to the presumption that the sale is
 
20                     not at wholesale unless the person rendering
 
21                     the sale is exclusively rendering services at
 
22                     wholesale.
 
23           (C)  Where any person engaging or continuing within the
 

 
Page 23                                                    
                                     S.B. NO.           
                                                        
                                                        

 
 1                State in any service business or calling renders
 
 2                those services upon the order of or at the request
 
 3                of another taxpayer who is engaged in the service
 
 4                business and who, in fact, acts as or acts in the
 
 5                nature of an intermediary between the person
 
 6                rendering those services and the ultimate
 
 7                recipient of the benefits of those services, so
 
 8                much of the gross income as is received by the
 
 9                person rendering the services shall be subjected
 
10                to the tax at the rate of one-half of one per cent
 
11                and all of the gross income received by the
 
12                intermediary from the principal shall be subjected
 
13                to a tax at the rate of four per cent.  Where the
 
14                taxpayer is subject to both this subparagraph and
 
15                to the lowest tax rate under subparagraph (A), the
 
16                taxpayer shall be taxed under this subparagraph.
 
17                This subparagraph shall be repealed on January 1,
 
18                [2006.] 2002.
 
19           (D)  Where any person is engaged in the business of
 
20                selling interstate or foreign common carrier
 
21                telecommunication services within and without the
 
22                State, the tax shall be imposed on that portion of
 
23                gross income received by a person from service
 

 
Page 24                                                    
                                     S.B. NO.           
                                                        
                                                        

 
 1                which is originated or terminated in this State
 
 2                and is charged to a telephone number, customer, or
 
 3                account in this State notwithstanding any other
 
 4                state law (except for the exemption under section
 
 5                237-23(a)(1)) to the contrary.  If, under the
 
 6                Constitution and laws of the United States, the
 
 7                entire gross income as determined under this
 
 8                paragraph of a business selling interstate or
 
 9                foreign common carrier telecommunication services
 
10                cannot be included in the measure of the tax, the
 
11                gross income shall be apportioned as provided in
 
12                section 237-21; provided that the apportionment
 
13                factor and formula shall be the same for all
 
14                persons providing those services in the State.
 
15      (7)  Tax on insurance solicitors and agents.  Upon every
 
16           person engaged as a licensed solicitor, general agent,
 
17           or subagent pursuant to chapter 431, there is hereby
 
18           levied and shall be assessed and collected a tax equal
 
19           to .15 per cent of the commissions due to that
 
20           activity.
 
21      (8)  Tax on receipts of sugar benefit payments.  Upon the
 
22           amounts received from the United States government by
 
23           any producer of sugar (or the producer's legal
 

 
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 1           representative or heirs), as defined under and by
 
 2           virtue of the Sugar Act of 1948, as amended, or other
 
 3           Acts of the Congress of the United States relating
 
 4           thereto, there is hereby levied a tax of one-half of
 
 5           one per cent of the gross amount received; provided
 
 6           that the tax levied hereunder on any amount so received
 
 7           and actually disbursed to another by a producer in the
 
 8           form of a benefit payment shall be paid by the person
 
 9           or persons to whom the amount is actually disbursed,
 
10           and the producer actually making a benefit payment to
 
11           another shall be entitled to claim on the producer's
 
12           return a deduction from the gross amount taxable
 
13           hereunder in the sum of the amount so disbursed.  The
 
14           amounts taxed under this paragraph shall not be taxable
 
15           under any other paragraph, subsection, or section of
 
16           this chapter.
 
17      (9)  Tax on other business.  Upon every person engaging or
 
18           continuing within the State in any business, trade,
 
19           activity, occupation, or calling not included in the
 
20           preceding paragraphs or any other provisions of this
 
21           chapter, there is likewise hereby levied and shall be
 
22           assessed and collected, a tax equal to four per cent of
 
23           the gross income thereof.  In addition, the rate
 

 
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 1           prescribed by this paragraph shall apply to a business
 
 2           taxable under one or more of the preceding paragraphs
 
 3           or other provisions of this chapter, as to any gross
 
 4           income thereof not taxed thereunder as gross income or
 
 5           gross proceeds of sales or by taxing an equivalent
 
 6           value of products, unless specifically exempted."
 
 7      SECTION 3.  Section 237-13.3, Hawaii Revised Statutes, is
 
 8 amended by amending subsection (a) to read as follows:
 
 9                                                                     10 the contrary notwithstanding, instead of the tax levied under
 
11 sections 237-4 and 237-13(6)(A) at one-half of one per cent,
 
12 during the period January 1, 2000, to December 31, [2005,] 2002,
 
13 the tax shall be as follows:
 
14      (1)  In calendar year 2000, [3.5 per cent;
 
15      (2)  In calendar year 2001,] 3.0 per cent;
 
16     [(3)] (2)  In calendar year [2002, 2.5 per cent;
 
17      (4)  In calendar year 2003,] 2001, 2.0 per cent;
 
18     [(5)  In calendar year 2004, 1.5 per cent;
 
19      (6)  In calendar year 2005, 1.0 per cent;] and
 
20     [(7)] (3)  In calendar year [2006] 2002 and thereafter, 0.5
 
21           per cent."
 
22      SECTION 4.  Section 237-16.5, Hawaii Revised Statutes, is
 
23 amended by amending subsection (g) to read as follows:
 

 
 
 
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                                     S.B. NO.           
                                                        
                                                        

 
 1      "(g)  After allocation under subsection (c), if necessary,
 
 2 the deduction under this section shall be allowed from the gross
 
 3 proceeds or gross income of the lessee received from its sublease
 
 4 in an amount calculated by multiplying the gross proceeds or
 
 5 gross income paid by the lessee to its lessor for the lease of
 
 6 the real property by the following amount:
 
 7      (1)  In calendar year 1998, .125;
 
 8      (2)  In calendar year 1999, .25;
 
 9      (3)  In calendar year 2000, .375;
 
10      (4)  In calendar year 2001, [.50;
 
11      (5)  In calendar year 2002, .625;
 
12      (6)  In calendar year 2003,] .75; and
 
13     [(7)] (5)  In calendar year [2004,] 2002, and thereafter,
 
14           .875.
 
15      The amount calculated under paragraphs (1) to [(7)] (5)
 
16 shall be deducted by the lessee from the lessee's total reported
 
17 gross proceeds or gross income.  The deduction allowed by this
 
18 subsection may be taken by the fiscal and calendar year lessees." 
 
19      SECTION 5.  Statutory material to be repealed is bracketed.
 
20 New statutory material is underscored.
 

 
 
 
 
 
 
 
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 1      SECTION 6.  This Act shall take effect upon its approval.
 
 2 
 
 3                           INTRODUCED BY:  _______________________