STAND. COM. REP. NO. 2446

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  S.B. No. 2160
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred S.B.
No. 2160 entitled: 

     "A BILL FOR AN ACT RELATING TO GENERAL EXCISE TAX,"

begs leave to report as follows:

     The purpose of this measure is to allow contractors to
report their income on a cash basis for general excise tax
purposes; provided that the contractor notifies the Department of
Taxation of the basis upon which the general excise tax is to be
reported.

     Testimony in support of the measure was received from the
Subcontractors Association of Hawaii, Associated Builders and
Contractors, Inc., the General Contractors Association of Hawaii,
Alakai Mechanical Corporation, the Plumbing and Mechanical
Contractors Association of Hawaii, the Sheet Metal Contractors
Association, and the Construction Industry Legislative
Organization.  The Department of Taxation did not oppose the
measure.  The Tax Foundation submitted comments.

     Your Committee finds that contractors that use an accrual or
percentage of completion method of accounting for income tax
purposes must also use the accrual method for reporting general
excise tax liability.  While large construction companies may be
able to pay their general excise tax liabilities without having
actually received the income reported on an accrual or percentage
of completion basis, smaller contractors experience difficulties

 
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                                   STAND. COM. REP. NO. 2446
                                   Page 2


in paying their general excise tax liabilities on income earned
by not yet received.

     This measure gives accrual based contractors the option to
report the general excise tax liability on a cash basis.

     Your Committee has amended the measure by replacing the word
"deal" with "report" and changing the effective date of the bill
from upon approval to January 1, 2001.

     As affirmed by the record of votes of the members of your
Committee on Ways and Means that is attached to this report, your
Committee is in accord with the intent and purpose of S.B.
No. 2160, as amended herein, and recommends that it pass Second
Reading in the form attached hereto as S.B. No. 2160, S.D. 1, and
be placed on the calendar for Third Reading.

                                 Respectfully submitted on behalf
                                 of the members of the Committee
                                 on Ways and Means,



                                 ________________________________
                                 CAROL FUKUNAGA, Co-Chair



                                 ________________________________
                                 ANDREW LEVIN, Co-Chair

 
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