REPORT TITLE:
General Excise Tax


DESCRIPTION:
Exempts from the general excise tax all amounts received for food
and drugs.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           941
TWENTIETH LEGISLATURE, 1999                                
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 237-24.3, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "§237-24.3  Additional amounts not taxable.  In addition to
 
 4 the amounts not taxable under section 237-24, this chapter shall
 
 5 not apply to:
 
 6      (1)  Amounts received from the loading, transportation, and
 
 7           unloading of agricultural commodities shipped for a
 
 8           producer or produce dealer on one island of this State
 
 9           to a person, firm, or organization on another island of
 
10           this State.  The terms "agricultural commodity",
 
11           "producer", and "produce dealer" shall be defined in
 
12           the same manner as they are defined in section 147-1;
 
13           provided that agricultural commodities need not have
 
14           been produced in the State;
 
15      (2)  Amounts received from sales of:
 
16           (A)  Intoxicating liquor as the term "liquor" is
 
17                defined in chapter 244D;
 
18           (B)  Cigarettes and tobacco products as defined in
 
19                chapter 245; and
 

 
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 1           (C)  Agricultural, meat, or fish products grown,
 
 2                raised, or caught in Hawaii, to any person or
 
 3                common carrier in interstate or foreign commerce,
 
 4                or both, whether ocean-going or air, for
 
 5                consumption out-of-state on the shipper's vessels
 
 6                or airplanes;
 
 7      (3)  Amounts received by the manager or board of directors
 
 8           of:
 
 9           (A)  An association of apartment owners of a
 
10                condominium property regime established in
 
11                accordance with chapter 514A; or
 
12           (B)  A nonprofit homeowners or community association
 
13                incorporated in accordance with chapter 415B or
 
14                any predecessor thereto and existing pursuant to
 
15                covenants running with the land,
 
16           in reimbursement of sums paid for common expenses;
 
17      (4)  Amounts received or accrued from:
 
18           (A)  The loading or unloading of cargo from ships,
 
19                barges, vessels, or aircraft, whether or not the
 
20                ships, barges, vessels, or aircraft travel between
 
21                the State and other states or countries or between
 
22                the islands of the State;
 
23           (B)  Tugboat services including pilotage fees performed
 

 
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 1                within the State, and the towage of ships, barges,
 
 2                or vessels in and out of state harbors, or from
 
 3                one pier to another; and
 
 4           (C)  The transportation of pilots or governmental
 
 5                officials to ships, barges, or vessels offshore;
 
 6                rigging gear; checking freight and similar
 
 7                services; standby charges; and use of moorings and
 
 8                running mooring lines;
 
 9      (5)  Amounts received by an employee benefit plan by way of
 
10           contributions, dividends, interest, and other income;
 
11           and amounts received by a nonprofit organization or
 
12           office, as payments for costs and expenses incurred for
 
13           the administration of an employee benefit plan;
 
14           provided that this exemption shall not apply to any
 
15           gross rental income or gross rental proceeds received
 
16           after June 30, 1994, as income from investments in real
 
17           property in this State; and provided further that gross
 
18           rental income or gross rental proceeds from investments
 
19           in real property received by an employee benefit plan
 
20           after June 30, 1994, under written contracts executed
 
21           prior to July 1, 1994, shall not be taxed until the
 
22           contracts are renegotiated, renewed, or extended, or
 
23           until after December 31, 1998, whichever is earlier.
 

 
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 1           For the purposes of this paragraph, "employee benefit
 
 2           plan" means any plan as defined in section 1002(3) of
 
 3           title 29 of the United States Code, as amended;
 
 4      (6)  Amounts received for purchases [made with United States
 
 5           Department of Agriculture food coupons under the
 
 6           federal food stamp program, and amounts received for
 
 7           purchases made with United States Department of
 
 8           Agriculture food vouchers under the Special
 
 9           Supplemental Foods Program for Women, Infants and
 
10           Children;] of food.
 
11           "Food" means the same as defined in 7 United States
 
12           Code Section 2012(g), as amended, and includes:
 
13           (A)  Any food or food product for home consumption
 
14                except alcoholic beverages, tobacco, and hot foods
 
15                or hot food products ready for immediate
 
16                consumption other than those authorized;
 
17           (B)  Seeds and plants for use in gardens to produce
 
18                food for the personal household consumption;
 
19           (C)  In the case of those persons who are sixty years
 
20                of age or over or who receive supplemental
 
21                security income benefits or disability or
 
22                blindness payments under title I, II, X, XIV, or
 
23                XVI, of the Social Security Act (42 U.S.C.A. §301
 

 
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 1                et seq., 401 et seq., 1201 et seq., 1351 et seq.,
 
 2                or 1381 et seq.), and their spouses, meals
 
 3                prepared by and served in senior citizens'
 
 4                centers, apartment buildings occupied primarily by
 
 5                such persons, public or private nonprofit
 
 6                establishments (eating or otherwise) that feed
 
 7                such persons, private establishments that contract
 
 8                with the appropriate agency of the State to offer
 
 9                meals for such persons at concessional prices, and
 
10                meals prepared for and served to residents of
 
11                federally subsidized housing for the elderly;
 
12           (D)  In the case of persons sixty years of age or over
 
13                and persons who are physically or mentally
 
14                handicapped or otherwise so disabled that they are
 
15                unable adequately to prepare all of their meals,
 
16                meals prepared for and delivered to them (and
 
17                their spouses) at their home by a public or
 
18                private nonprofit organization or by a private
 
19                establishment that contracts with the appropriate
 
20                state agency to perform such services at
 
21                concessional prices;
 
22           (E)  In the case of narcotics addicts or alcoholics,
 
23                and their children, served by drug addiction or
 

 
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 1                alcoholic treatment and rehabilitation programs,
 
 2                meals prepared and served under such programs;
 
 3           (F)  In the case of disabled or blind recipients of
 
 4                benefits under title I, II, X, XIV, or XVI of the
 
 5                Social Security Act (42 U.S.C.A. §301 et seq., 401
 
 6                et seq., 1201 et seq., 1351 et seq., or 1381 et
 
 7                seq.), or residents in a public or private
 
 8                nonprofit group living arrangement that serves no
 
 9                more than sixteen residents and is certified by
 
10                the appropriate state agency meals prepared and
 
11                served under such arrangement;
 
12           (G)  In the case of women and children temporarily
 
13                residing in public or private nonprofit shelters
 
14                for battered women and children, meals prepared
 
15                and served, by such shelters; and
 
16           (H)  In the case of households that do not reside in
 
17                permanent dwellings and households that have no
 
18                fixed mailing addresses, meals prepared for and
 
19                served by a public or private nonprofit
 
20                establishment (approved by an appropriate state
 
21                agency) that feeds such individuals and by private
 
22                establishments that contract with the appropriate
 
23                agency of the State to offer meals for such
 

 
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 1                individuals at concessional prices.
 
 2      (7)  Amounts received by a hospital, infirmary, medical
 
 3           clinic, health care facility, pharmacy, or a licensed
 
 4           practitioner [licensed to administer the drug to an
 
 5           individual for selling prescription drugs or prosthetic
 
 6           devices to an individual; provided that this paragraph
 
 7           shall not apply to] for the rendering of any medical
 
 8           services, including any amounts received for services
 
 9           provided in selling prescription drugs or prosthetic
 
10           devices.  As used in this paragraph:
 
11           (A)  "Prescription drugs" are those drugs defined under
 
12                section [[]328-1[]] and dispensed by filling or
 
13                refilling a written or oral prescription by a
 
14                practitioner licensed under law to administer the
 
15                drug and sold by a licensed pharmacist under
 
16                section 328-16 or practitioners licensed to
 
17                administer drugs; and
 
18           (B)  "Prosthetic device" means any artificial device or
 
19                appliance, instrument, apparatus, or contrivance,
 
20                including their components, parts, accessories,
 
21                and replacements thereof, used to replace a
 
22                missing or surgically removed part of the human
 
23                body, which is prescribed by a licensed
 

 
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                                     S.B. NO.           941
                                                        
                                                        

 
 1                practitioner of medicine, osteopathy, or podiatry
 
 2                and which is sold by the practitioner or which is
 
 3                dispensed and sold by a dealer of prosthetic
 
 4                devices; provided that "prosthetic device" shall
 
 5                not mean any auditory, ophthalmic, dental, or
 
 6                ocular device or appliance, instrument, apparatus,
 
 7                or contrivance;
 
 8      (8)  Amounts received for the purchases of drugs.  For the
 
 9           purposes of this section, "drugs" means the same as
 
10           defined by title 21 United States Code in section
 
11           321(g), as amended, and includes:
 
12           (A)  Articles recognized in the official United States
 
13                Pharmacopoeia, official Homeopathic Pharmacopoeia
 
14                of the United States, or official National
 
15                Formulary, or any supplement to any of them;
 
16           (B)  Articles intended for use in the diagnosis, cure,
 
17                mitigation, treatment, or prevention of disease in
 
18                humans or other animals;
 
19           (C)  Articles (other than food) intended to affect the
 
20                structure or any function of the body of humans or
 
21                other animals;
 
22           (D)  Articles intended for use as a component of any
 
23                article specified in subparagraph (A), (B), or
 

 
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 1                (C).  A food or dietary supplement is not a drug
 
 2                solely because the label or the labeling contains
 
 3                such a claim.  A food, dietary ingredient, or
 
 4                dietary supplement for which a truthful and not
 
 5                misleading statement is made is not a drug under
 
 6                subparagraph (C) solely because the label or the
 
 7                labeling contains such a statement.
 
 8     [(8)] (9)  Taxes on transient accommodations imposed by
 
 9           chapter 237D and passed on and collected by operators
 
10           holding certificates of registration under that
 
11           chapter;
 
12     [(9)] (10)  Amounts received as dues by an unincorporated
 
13           merchants association from its membership for
 
14           advertising media, promotional, and advertising costs
 
15           for the promotion of the association for the benefit of
 
16           its members as a whole and not for the benefit of an
 
17           individual member or group of members less than the
 
18           entire membership; and
 
19    [(10)] (11)  Amounts received by a labor organization for real
 
20           property leased to:
 
21           (A)  A labor organization; or
 
22           (B)  A trust fund established by a labor organization
 
23                for the benefit of its members, families, and
 

 
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                                     S.B. NO.           941
                                                        
                                                        

 
 1                dependents for medical or hospital care, pensions
 
 2                on retirement or death of employees,
 
 3                apprenticeship and training, and other membership
 
 4                service programs.
 
 5           As used in this paragraph, "labor organization" means a
 
 6           labor organization exempt from federal income tax under
 
 7           section 501(c)(5) of the Internal Revenue Code, as
 
 8           amended."
 
 9      SECTION 2.  Section 238-2, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "§238-3 Application of tax, etc.(a)  The tax imposed by
 
12 this chapter shall not apply to any property, or to any use of
 
13 the property, which cannot legally be so taxed under the
 
14 Constitution or laws of the United States, but only so long as,
 
15 and only to the extent to which the State is without power to
 
16 impose the tax.
 
17      Any provision of law to the contrary notwithstanding,
 
18 exemptions or exclusions from tax under this chapter allowed on
 
19 or before April 1, 1978 under the provisions of the Constitution
 
20 of the United States or an act of the Congress of the United
 
21 States to persons or common carriers engaged in interstate or
 
22 foreign commerce, or both, whether ocean-going or air, shall
 
23 continue undiminished and be available thereafter.
 

 
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                                     S.B. NO.           941
                                                        
                                                        

 
 1      (b)  The tax imposed by this chapter shall not apply to any
 
 2 use of property the transfer of which property to, or the
 
 3 acquisition of which by, the person so using the same, has
 
 4 actually been or actually is taxed under chapter 237.
 
 5      (c)  The tax imposed by this chapter shall be paid only once
 
 6 upon or in respect of the same property; provided that nothing in
 
 7 this chapter contained shall be construed to exempt any property
 
 8 or the use thereof from taxation under any other law of the
 
 9 State.
 
10      (d)  The tax imposed by this chapter shall be in addition to
 
11 any other taxes imposed by any other laws of the State, except as
 
12 otherwise specifically provided herein; provided that if it be
 
13 finally held by any court of competent jurisdiction, that the tax
 
14 imposed by this chapter may not legally be imposed in addition to
 
15 any other tax or taxes imposed by any other law or laws with
 
16 respect to the same property or the use thereof, then this
 
17 chapter shall be deemed not to apply to the property and the use
 
18 thereof under such specific circumstances, but such other laws
 
19 shall be given full effect with respect to the property and use.
 
20      (e)  The tax imposed by this chapter shall not apply to any
 
21 use of property exempted by section 238-4.
 
22      (f)  The tax imposed by this chapter shall not apply to any
 
23 use or consumption of aircraft and vessels, the transfer of which
 

 
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                                     S.B. NO.           941
                                                        
                                                        

 
 1 aircraft or vessel to, or the acquisition of which by, the person
 
 2 so using or consuming the same, or the rental for the use of the
 
 3 aircraft or vessel, has actually been or actually is taxed under
 
 4 chapter 237.
 
 5      (g)  The tax imposed by this chapter shall not apply to any
 
 6 intoxicating liquor as defined in chapter 244D and cigarettes and
 
 7 tobacco products as defined in chapter 245, imported into the
 
 8 State and sold to any person or common carrier in interstate
 
 9 commerce, whether ocean-going or air, for consumption out-of-
 
10 state by the person, crew, or passengers on the shipper's vessels
 
11 or airplanes.
 
12      (h)  The tax imposed by this chapter shall not apply to any
 
13 use of vessels constructed under section 189-25 prior to July 1,
 
14 1969.
 
15      (i)  Each taxpayer liable for the tax imposed by this
 
16 chapter on tangible personal property shall be entitled to full
 
17 credit for the combined amount or amounts of legally imposed
 
18 sales or use taxes paid by the taxpayer with respect to the same
 
19 transaction and property to another state and any subdivision
 
20 thereof, but such credit shall not exceed the amount of the use
 
21 tax imposed under this chapter on account of the transaction and
 
22 property.  The director of taxation may require the taxpayer to
 
23 produce the necessary receipts or vouchers indicating the payment
 

 
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 1 of the sales or use tax to another state or subdivision as a
 
 2 condition for the allowance of the credit.
 
 3      (j)  The tax imposed by this chapter shall not apply to any
 
 4 use of property exempted by section 237-26 or section 237-29.
 
 5      (k)  The tax imposed by this chapter shall not apply to any
 
 6 use of air pollution control facility exempted by section
 
 7 237-27.5.
 
 8      (l)  The tax imposed by this chapter shall not apply to food
 
 9 or drugs exempt from general excise tax under paragraphs
 
10 237-24.3(6) and (8)."
 
11      SECTION 3.  Statutory material to be repealed is bracketed.
 
12 New statutory material is underscored.
 
13      SECTION 4.  This Act shall take effect upon its approval.
 
14 
 
15                              INTRODUCED BY:______________________