STAND. COM. REP. NO. 719

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 744
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred S.B.
No. 744 entitled: 

     "A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this measure is to exempt certain activities
of call centers from taxation

     The Department of Taxation and Department of Business,
Economic Development, and Tourism supported the intent of this
measure.  The Hawaii High Technology Development Corporation and
the Estate of James Campbell supported the measure while Hawaiian
Electric Company supported the measure with amendments.  The Tax
Foundation of Hawaii submitted comments on the measure.

     Hawaii has a number of distinct advantages for the
development of a call center industry.  It has a highly developed
telecommunication industry with optic fiber capacity and regional
satellite technology, both of which are necessary for call
centers.  It also has a population that speaks a number of Asian
languages as well as English.  Finally, Hawaii is in a time zone
which allows us to do business with both Asia and the mainland
while one or both are doing business during the same business
day.

     Your Committee finds that a number of companies have
indicated an interest in establishing call centers in Hawaii, but
Australia is already developing a strong Asia-Pacific market.

 
a                                                     SB744 SD1
                                   STAND. COM. REP. NO. 719
                                   Page 2


Once again, Hawaii has a small window of opportunity in which to
make a positive statement to interested parties or to miss an
opportunity for failure to act.

     Your Committee notes a statement by Governor Benjamin J.
Cayetano in a two page advertisement on "The Next Four Years,
Completing the Vision."  In that advertisement the Governor
stated "We will propose tax and other incentives to establish
Hawaii as a call center for high tech companies.  Call centers
can provide hundreds of good paying high tech jobs for our high
school graduates who choose to pursue vocational careers instead
of college."  Your Committee is in full agreement with the
statement of the Governor.

     Your Committee has amended this measure to tighten the tax
exemption provided a call center regarding using the center as a
nexus for the State to find that the other businesses of the
company running the call center are taxable.  On the one hand,
establishment of a call center by itself should not establish
taxing nexus or many companies may not choose to come to Hawaii.
On the other hand, this exemption should only apply to the call
center and the income from the direct customer service and
support given by the call center.  In addition, the phrase "and
the like" has been deleted from the definition of call center to
provide specificity.

     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. 744, as amended herein, and recommends that it pass Third
Reading in the form attached hereto as S.B. No. 744, S.D. 1.

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



                                 ________________________________
                                 CAROL FUKUNAGA, Co-Chair



                                 ________________________________
                                 ANDREW LEVIN, Co-Chair

 
a                                                     SB744 SD1