Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Consumer Protection and Commerce, to which was referred H.B. No. 1684 entitled:

begs leave to report as follows:

The purpose of this bill is to conform Hawaii law to the newly enacted federal Mobile Telecommunications Sourcing Act (MTSA), which provides a uniform method for determining which state has jurisdiction to impose taxes on wireless services. Under MTSA, wireless telecommunications may be taxed by a state if the source of these communications is in the state. MTSA "sources" wireless calls to the wireless subscriber's residential or business address, whichever is the place of primary use. This measure amends state law to adopt the MTSA sourcing methodology and allow Hawaii to assess taxes on wireless services as of August 1, 2002.

Your Committee received testimony in support of this measure from AT&T, Sprint, Verizon Wireless, and Voice Stream Wireless. The Department of Taxation supported the intent of the bill. Tax Foundation of Hawaii provided comments.

Your Committee finds that telecommunications are currently subject to taxation, and this measure will not alter or change the existing tax base. Your Committee further finds that this bill is a prudent response to MTSA; Hawaii must update its laws or lose the ability to impose and collect taxes on wireless services.

Your Committee has made technical, nonsubstantive amendments to the bill, and understands that further technical and substantive amendments to this measure may be necessary to reflect the resolution of issues still being discussed by DOTAX and the industry.

As affirmed by the record of votes of the members of your Committee on Consumer Protection and Commerce that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1684, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1684, H.D. 1, and be referred to the Committee on Finance.