Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 2827 entitled:

begs leave to report as follows:

The purpose of this measure is to create a General Excise Tax (GET) credit for taxes paid in another state to avoid constitutionally prohibited multiple taxation.

Your Committee received testimony in support of this measure from the Department of Taxation (DOTAX). The Tax Foundation of Hawaii submitted comments.

Your Committee notes that this bill is necessary to avoid possible constitutional problems resulting from the taxation of the same goods or services by Hawaii and another jurisdiction. While this does not occur with great frequency, the Department of Taxation presently has no tools to avoid a possible court case in this area. The provisions of this bill will give the Department of Taxation the appropriate language to address the possibility of double taxation in a manner similar to that provided the Department under section 238-3(a), Hawaii Revised Statutes.

Your Committee amended this measure to use the term "offset," rather than "credit," for accuracy.

Your Committee also amended this measure to clarify when the offset is applied and incorporated language to give DOTAX greater flexibility in implementing this offset.

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. 2827, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2827, S.D. 1, and be placed on the calendar for Third Reading.