STAND

STAND. COM. REP. 2626

Honolulu, Hawaii

, 2004

RE: S.B. No. 2994

S.D. 1

Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committees on Judiciary and Hawaiian Affairs and Ways and Means, to which was referred S.B. No. 2994, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO THE USE TAX,"

beg leave to report as follows:

The purpose of this measure is to clarify the use tax law in light of the Hawaii Supreme Court decision of In the matter of Baker & Taylor, Inc. v. Director of Taxation.

This measure:

(1) Clarifies when a seller is subject to the 0.5 per cent use tax;

(2) Restores the imposition of taxes on goods purchased both within and outside the State; and

(3) Clarifies that the use tax applies to sellers who acquire goods from outside the State and imports the product for resale in the State.

Testimony in support of this measure was received from the Department of Taxation (DTAX) and Hawaii Automobile Dealers Association representing franchised new vehicle dealers. Comments were received from the Tax Foundation of Hawaii.

According to testimony of DTAX, although there is no revenue impact from this measure, the amount of tax revenue at issue is approximately $9 million annually starting this year and going forward, as well as $27 million for the past three years due to amended returns.

As affirmed by the records of votes of the members of your Committees on Judiciary and Hawaiian Affairs and Ways and Means that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 2994, S.D. 1, and recommend that it pass Third Reading.

Respectfully submitted on behalf of the members of the Committees on Judiciary and Hawaiian Affairs and Ways and Means,

____________________________ BRIAN T. TANIGUCHI, Chair		____________________________ COLLEEN HANABUSA, Chair