STAND. COM. REP. NO. 2746

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  S.B. No. 2945
                                        S.D. 1




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

Sir:

     Your Committees on Commerce and Consumer Protection and Ways
and Means, to which was referred S.B. No. 2945 entitled: 

     "A BILL FOR AN ACT RELATING TO TAXATION,"

beg leave to report as follows:

     The purpose of this measure is to provide for more
consistent tax treatment of services and contracting, provide
relief from general excise tax (GET) pyramiding for the sale of
amusements, lower public service company (PSC) tax rates for
telecommunication and transportation services that are resold,
and make technical amendments to Acts 70 and 71, Session Laws of
Hawaii (SLH) 1999.

     Testimony on the measure was submitted by the Department of
Taxation, Hawaii Bankers Association, Tax Foundation of Hawaii,
Hawaii Association of Realtors, Hawaii Society of Certified
Public Accountants, AT&T, GTE, and Honolulu Freight Service.

     Act 70, SLH 1999, imposed a use tax on services performed
outside of the State, and imported or purchased for resale or use
in the State, and exempted from the GET services and contracting
performed in the State, but exported for resale or use outside of
the State.  This measure imposes the use tax on imported
contracting, consistent with the imposition of the use tax on
services and the exemption from GET for exported services and
contracting.  


 
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     Additionally, this measure provides relief from the
pyramiding effect of the GET for amusement-to-service, amusement-
to tangible personal property, and amusement-to-amusement
transactions.  The measure also establishes graduated tax rate
decreases applicable to the sale of telecommunication services by
a public utility to an interstate telecommunications provider who
resells the services at retail, and transportation services sold
by a motor carrier or contract carrier to a construction industry
contractor.  Finally, this measure makes numerous technical
amendments to the GET and PSC laws.

     Upon careful consideration, your Committees have amended
this measure by:

     (1)  Including the use of debit card, credit card, merchant
          card draft, and trust administration services imported
          or purchased by a bank within the use tax exemption;

     (2)  Phasing in the PSC tax rate relief more gradually;

     (3)  Extending PSC tax relief to freight forwarders;

     (4)  Inserting a defective approval date for purposes of
          further discussion; and

     (5)  Making technical, nonsubstantive amendments for
          purposes of style and clarity, and to reflect existing
          language in the Hawaii Revised Statutes.

     As affirmed by the records of votes of the members of your
Committees on Commerce and Consumer Protection and Ways and Means
that are attached to this report, your Committees are in accord
with the intent and purpose of S.B. No. 2945, as amended herein,
and recommend that it pass Second Reading in the form attached
hereto as S.B. No. 2945, S.D. 1, and be placed on the calendar
for Third Reading.


 
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                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Commerce and
                                   Consumer Protection and Ways
                                   and Means,



____________________________       ______________________________
CAROL FUKUNAGA, Co-Chair           BRIAN KANNO, Co-Chair



____________________________       ______________________________
ANDREW LEVIN, Co-Chair             BRIAN T. TANIGUCHI, Co-Chair

 
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