STAND. COM. REP. NO. 1011

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 176
                                        H.D. 2
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Health and Human Services, to which was
referred H.B. No. 176, H.D. 2, entitled: 

     "A BILL FOR AN ACT RELATING TO TOBACCO TAX,"

begs leave to report as follows:

     The purpose of this measure is to require cigarette or
tobacco licensees to affix a stamp certifying payment of
applicable excise taxes on packages of cigarettes prior to being
sold to the general public.

     Your Committee received testimony in support of this measure
from the Department of Taxation (DOT), Department of Health,
Hawaii Medical Association, and American Lung Association.
Informational testimony was provided by the Tax Foundation of
Hawaii and Hawaii Food Industry Association.

     Your Committee finds that this measure will provide for
greater assurance that state cigarette taxes are paid thereby
reducing the sales of untaxed cigarettes and keeping the price of
the product at market levels.  As a result, there will be greater
assurance that untaxed cigarettes, which are less expensive, will
not find their way into the hands of minors.  Therefore, minors
will be discouraged from experimenting with smoking cigarettes
and the likelihood of them becoming adult smokers will be
reduced.


 
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                                   STAND. COM. REP. NO. 1011
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     Your Committee has amended this measure on the
recommendation of the DOT by:

     (1)  Making an appropriation to the DOT for start-up costs
          of the cigarette stamp tax program;

     (2)  Inserting a stamp fee of .2 per cent of the denominated
          value of the stamp (which is equal to $1.00 per stamp);
          and

     (3)  Providing for treatment of unstamped cigarettes.

     Your Committee has also deleted as unnecessary section
245-H(b), relating to allowing licensees to include in the price
of stamped cigarettes, a distributor's fee to cover costs
relating to the stamp fee in an amount as determined by the DOT
by rules.  Your Committee believes that whether or not the stamp
fee is passed on to the buyer should be in the discretion of the
seller and that costs relating to the stamp fee are too nebulous
to be determined by administrative rule.

     Your Committee has made technical, nonsubstantive amendments
for purposes of clarity and to reflect preferred drafting style.

     As affirmed by the record of votes of the members of your
Committee on Health and Human Services that is attached to this
report, your Committee is in accord with the intent and purpose
of H.B. No. 176, H.D. 2, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as H.B.
No. 176, H.D. 2, S.D. 1, and be referred to the Committee on Ways
and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Health and Human
                                   Services,



                                   ______________________________
                                   SUZANNE CHUN OAKLAND, Chair

 
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