STAND. COM. REP. NO. 910-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: S.B. No. 1427
                                     S.D. 1
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committees on Agriculture and Ocean Recreation and
Marine Resources, to which was referred S.B. No. 1427, S.D. 1,
entitled: 

     "A BILL FOR AN ACT RELATING TO AQUACULTURE,"

beg leave to report as follows:

     The purpose of this bill is to clarify that aquaculture
production transactions are taxed at the wholesale rate of one-
half of one percent.

     Specifically, this bill applies the wholesale rate under the
general excise tax (GET) to:

     (1)  Sales of land, infrastructure, or equipment to a
          licensed aquaculture producer, cooperative, or not-for-
          profit association; or

     (2)  The sale of materials, supplies, or commodities used by
          the licensed producer, cooperative, or not-for-profit
          association in the production of aquaculture products
          for sale.

     The Hawaii Aquaculture Association testified in support of
the measure with suggested amendments.  The Department of
Agriculture testified in support of the intent of the measure,
but deferred to the Department of Taxation (DOTAX) on matters of
substance.  DOTAX and the Tax Foundation of Hawaii submitted
comments on this measure.


 
                                 STAND. COM. REP. NO. 910-00
                                 Page 2

 
     Your Committees heard concerns expressed by DOTAX in its
testimony that the bill's substance does not accomplish its
stated purpose to provide the wholesale rate to certain sales to
a licensed aquaculture producer, cooperative, or not-for-profit
association, and as such, the aquaculture industry might be
subject to greater taxation than intended.
     
     Your Committees have amended this bill by:

     (1)  Amending the application of the wholesale rate under
          the GET to:

          (A)  Sales of materials, supplies, or commodities to a
               commercial aquaculture producer or cooperative; or

          (B)  The rental or leasing of equipment used by the
               commercial aquaculture producer or cooperative in
               the production of aquaculture products for sale;

     (2)  Changing the description of sales and sales at
          wholesale;

     (3)  Changing the effective date to July 1, 2000; and

     (4)  Making technical, nonsubstantive amendments for clarity
          and style.

     As affirmed by the records of votes of the members of your
Committees on Agriculture and Ocean Recreation and Marine
Resources that are attached to this report, your Committees are
in accord with the intent and purpose of S.B. No. 1427, S.D. 1,
as amended herein, and recommend that it pass Second Reading in
the form attached hereto as S.B. No. 1427, S.D. 1, H.D. 1, and be
referred to the Committee on Economic Development and Business
Concerns.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Agriculture and
                                   Ocean Recreation and Marine
                                   Resources,

                                   
                                   
                                   
                                   
______________________________     ______________________________
ROY M. TAKUMI, Chair               FELIPE P. ABINSAY, JR., Chair