Establishes an annual general excise tax holiday for consumers and businesses that sell goods with a retail price under $100 on condition that businesses pass the savings on to consumers.

A BILL FOR AN ACT

SECTION 1. The purpose of this Act is to give both consumers and businesses a break from the high cost of living in Hawaii by establishing an annual general excise tax holiday not to exceed seven days. For years, consumers and businesses have suffered under the weight of the general excise tax, this most regressive tax.

For a period not to exceed seven days each year, sales of items under $100 would be exempt from the normal retail or general excise tax of four per cent. However, because the tax is imposed on the seller rather than the buyer, the only requirement is that the tax savings be passed on to the consumer.

Tax holidays have been used successfully across the United States. For example, Texas lifted its 6.25 per cent state sales tax, along with all local sales taxes, on clothing and footwear under $100. New York and Florida already have similar programs.

More importantly, tax holidays have been found to create sales. Many Texas retailers have reported seeing crowds usually seen only during the Christmas selling season. To accommodate all of the shoppers, stores in Texas adopted extended hours, added staff, and offered special promotions usually reserved for holidays. While depressed sales might be expected after a tax holiday, retailers have not noticed fewer sales after a sales spike.

While Hawaii's pyramiding excise tax has retarded economic growth, affected retail sales and profits, and dampened job creation, a tax holiday would have the opposite effect by stimulating retail sales and giving a boost to our recovering economy. A general excise tax holiday in Hawaii would help both consumers and retailers alike.

SECTION 2. Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§237-     Annual tax holiday. (a) Notwithstanding any law to the contrary, taxes under this chapter shall not be due on the sale of goods if the sales price of the article is less than $100, and the sale takes place during the period beginning at 12:01 a.m. on and ending at 12 midnight ; provided that all savings generated by this section shall be passed on by the seller to the purchaser. This exemption shall apply to retail sales only and not to sales on items that will be resold in any manner.

(b) The exemption provided in this section shall apply to all items with retail sales prices less than $100, regardless of how many items are sold on the same invoice to a customer.

(c) The exemption provided in this section shall not apply to:

(d) Articles that are normally sold as a unit shall continue to be sold in that manner and shall not be priced separately and sold as individual items to obtain the exemption.

(e) A retailer may offer discounts to reduce the sales price of an item. If the discount reduces the sales price to $99.99 or less, the item shall qualify for the exemption.

(f) The total price of items advertised as "buy one, get one free," or "buy one, get one for a reduced price," shall not be averaged for both items to qualify for the exemption.

(g) The retailer shall not be required to obtain any special license, permit, or other documentation on sales of eligible items during the exemption holiday period; provided that the retailer's records shall clearly identify the type of item sold, the date the item was sold, and the sales price of the item."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect on July 1, 2005.