STAND. COM. REP. NO. 893-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: S.B. No. 2945
                                     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 Committee on Economic Development and Business
Concerns, to which was referred S.B. No. 2945, S.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this bill is to:

     (1)  Make technical amendments to statutory provisions
          enacted under Acts 70 and 71, Session Laws of Hawaii
          1999;

     (2)  Impose the use tax on contracting imported for resale
          or use in Hawaii;

     (3)  Provide pyramiding relief from the general excise tax
          for the sale of amusements;

     (4)  Provide a lower public service company (PSC) tax rate
          on telecommunications services and transportation
          services that are resold;

     (5)  Provide a use tax exemption for debit card, credit
          card, merchant card draft, and trust administration
          services imported by a bank for use in the State; and

     (6)  Provide a lower PSC tax rate for freight forwarders.


 
 
                                 STAND. COM. REP. NO. 893-00
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     The Hawaii Bankers Association testified in support of this
measure but with a proposed amendment.  GTE Hawaiian Telephone,
AT&T, Honolulu Freight Service, Emery Worldwide, and Con-Way
Transportation Systems also testified in support of the measure.
Comments were submitted by the Department of Taxation, Tax
Foundation of Hawaii, and Committee on Taxation of the Hawaii
Society of Certified Public Accountants.

     Your Committee notes that this bill is similar to H.B. No.
2604, H.D. 2, which passed the House of Representatives earlier
this session after public hearings before this Committee and the
Committee on Finance.

     Your Committee has made amendments to conform this bill to
H.B. No. 2604, H.D. 2, by deleting the provisions that:

     (1)  Provide a use tax exemption for debit card, credit
          card, merchant card draft, and trust administration
          services imported by a bank for use in the State; and

     (2)  Provide a lower PSC tax rate for freight forwarders.

     Your Committee further amended the bill by:

     (1)  Clarifying that the use of financial services imported
          or purchased by a financial institution is exempted
          from the use tax until June 30, 2004; and

     (2)  Requiring the Auditor to:

          (a)  Conduct a study on whether debit card, credit
               card, merchant card draft, and trust
               administration services can be or are being
               performed in the State; and

          (b)  Submit a report of the findings and
               recommendations to the Legislature prior to the
               repeal of the provision relating to the use tax
               exemption for the use of financial services
               imported or purchased by a financial institution
               on June 30, 2004.

     As affirmed by the record of votes of the members of your
Committee on Economic Development and Business Concerns that is
attached to this report, your Committee is in accord with the
intent and purpose of S.B. No. 2945, S.D. 1, as amended herein,
and recommends that it pass Second Reading in the form attached
hereto as S.B. No. 2945, S.D. 1, H.D. 1, and be referred to the
Committee on Consumer Protection and Commerce.

 
                                 STAND. COM. REP. NO. 893-00
                                 Page 3

 
                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Economic
                                   Development and Business
                                   Concerns,



                                   ______________________________
                                   ROBERT N. HERKES, Chair