CONFERENCE COMMITTEE REPORT NO.98

                            Honolulu, Hawaii
                                            , 2000

                            RE:   S.B. No. 2486
                                  S.D. 2
                                  H.D. 2
                                  C.D. 1




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

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

Sir:

     Your Committee on Conference on the disagreeing vote of the
Senate to the amendments proposed by the House of Representatives
in S.B. No. 2486, S.D. 2, H.D. 2, entitled:  

     "A BILL FOR AN ACT RELATING TO TAXATION," 

having met, and after full and free discussion, has agreed to
recommend and does recommend to the respective Houses the final
passage of this bill in an amended form.

     The purpose of this measure is to establish a mandatory
cigarette stamp tax system as a means to assess, collect, and
enforce the cigarette and tobacco tax.

     Your Committee on Conference finds that a mandatory
cigarette tax stamp system is vital to enhance the State's
collection of cigarette and tobacco taxes.  Your Committee on
Conference further finds that enforcement of the current system
of collecting cigarette and tobacco taxes is sporadic, haphazard,
and ineffective, resulting in uncollected potential tax revenue.
The current system of filing of returns by licensed dealers is in
effect a system of voluntary compliance.  Persons may try to sell

 
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cigarettes and tobacco without obtaining a license, or could have
a license and not file a return or understate the income on the
return.

     Your Committee on Conference further finds that obtaining
actual proof of large-scale black market cigarette sales is
nearly impossible, due to the nature of the activity which is
necessarily surreptitious and to the limitation of available
resources.  However, your Committee believes that actual proof of
the magnitude of the black market is unnecessary, judging from
the anecdotal evidence existing and continuing over a fifteen
year period that a black market exists.  Recent increases in the
cigarette tax contributes to the temptation to enter the black
market.

     Your Committee on Conference further finds that enforcement
of a mandatory cigarette tax stamp system need not be overly
burdensome or expensive for the Department of Taxation to
administer.  Any additional costs will more than likely pay for
itself in the form of additional tax revenues to be derived.  Any
administrative rules could be adopted within the time frame
provided for the effective date of this Act.

     Your Committee on Conference believes that this measure will
augment efforts to deter smoking, especially among youth.  This
measure also provides the necessary enforcement of the new
stamping of cigarette packs requirements by the attorney general.

     Your Committee on Conference has amended this measure by:

     (1)  Deleting provisions relating to export and import of
          foreign cigarettes, on the recommendation of the
          Attorney General based on bill title problems;

     (2)  Inserting an appropriation amount of $35,000, to the
          Department of Taxation and an amount of $200,000 to the
          Attorney General;

     (3)  Clarifying the appropriate statutory reference
          citations for the reenactment provision; and

     (4)  Making nonsubstantive changes for drafting purposes.

     As affirmed by the record of votes of the managers of your
Committee on Conference that is attached to this report, your
Committee on Conference is in accord with the intent and purpose
of S.B. No. 2486, S.D. 2, H.D. 2, as amended herein, and
recommends that it pass Final Reading in the form attached hereto
as S.B. No. 2486, S.D. 2, H.D. 2, C.D. 1.

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                                   Respectfully submitted on
                                   behalf of the managers:

  ON THE PART OF THE HOUSE           ON THE PART OF THE SENATE




_____________________________     _______________________________
Rep. RON MENOR                    Sen. SUZANNE CHUN OAKLAND
Co-Chair                          Co-Chair



_____________________________     _______________________________
Rep. SCOTT K. SAIKI               Sen. CAROL FUKUNAGA
Co-Chair                          Co-Chair



_____________________________     _______________________________
Rep. BRIAN Y. YAMANE              Sen. BRIAN T. TANIGUCHI
Co-Chair                          Co-Chair

 
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