RESOLUTION

WHEREAS, Act 247, Session Laws of Hawaii 2005, authorized the counties to establish a surcharge on the state general excise tax to fund county mass transportation projects; and

WHEREAS, Act 247 also authorized the Department of Taxation to administer and collect the county surcharge and retain ten per cent of the surcharge for administrative purposes; and

WHEREAS, to augment the funding of its mass transportation projects, the City and County of Honolulu has adopted an ordinance to levy a county surcharge on the state general excise tax, with collection to be implemented on January 1, 2007; and

WHEREAS, in accordance with Act 247, the Department of Taxation is the appropriate agency to administer and collect the county surcharge since the Department already administers and collects the state general excise tax; and

WHEREAS, in a recent study, the Government Finance Officers Association found that in the thirty-three states that have local sales taxes, thirty of those states have state administration of the local sales taxes to promote government efficiency and eliminate unnecessary, duplicative government action; and

WHEREAS, requiring the Department of Taxation to administer and collect the county surcharge would ensure uniformity in collection, reduce bureaucratic inefficiency caused by duplicative state and county functions, reduce paperwork for taxpayers, eliminate tax payments to two separate taxing entities, and eliminate the possibility of businesses being subjected to duplicative and unnecessary audits; and

WHEREAS, testimony from organizations representing retail merchants, automobile dealers, and a public sector union agree that the State should administer and collect the county surcharge, a practice almost uniformly employed in states that have local sales taxes; and

WHEREAS, as the State's legal officer, the Attorney General should analyze existing law to identify impediments to implementing the Department of Taxation's timely collection of the county surcharge to enable the Legislature to take any necessary corrective action before the 2006 Regular Session is concluded; and

WHEREAS, in the 1990s, the Department of Taxation successfully modernized the tax information systems utilizing an innovative benefits-funded contract initiative that resulted in increased departmental performance and an increase in revenues for the state general fund; and

WHEREAS, in the 2006 session, the Department of Taxation's benefits-funded contracts initiative would facilitate the efficient implementation of the collection of the county surcharge on the state general excise tax; now, therefore,

BE IT RESOLVED by the Senate of the Twenty-third Legislature of the State of Hawaii, Regular Session of 2006, the House of Representatives concurring, that the Attorney General is requested to submit a report on the collection of the county tax surcharge to the Legislature no later than fifteen days before the conclusion of the 2006 Regular Session; and

BE IT FURTHER RESOLVED that in submitting the report, the Attorney General is requested to include an analysis of existing law to identify impediments to implementing the Department of Taxation's collection of the county surcharge and to provide suggested legislation that eliminates any existing impediments or obstacles to timely implementation; and

BE IT FURTHER RESOLVED that the Department of Taxation is requested to establish and submit to the Legislature no later than fifteen days before the conclusion of the 2006 Regular Session an implementation plan that provides for the Department's administration and collection of the county surcharge to fund county mass transportation projects beginning on January 1, 2007; and

BE IT FURTHER RESOLVED that the City and County of Honolulu is requested to assist the Attorney General and the Department of Taxation in developing a plan to implement the administration and collection of the county surcharge and identifying impediments to the Department of Taxation implementation of the county surcharge collection by January 1, 2007; and

BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the Director of Taxation, the Attorney General, the Mayor of the City and County of Honolulu, and the Chairperson of the Honolulu City Council.

Report Title:

County Surcharge; General Excise Tax; Administration