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HOUSE OF REPRESENTATIVES |
H.R. NO. |
133 |
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TWENTY-FOURTH LEGISLATURE, 2007 |
H.D. 1 |
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STATE OF HAWAII |
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HOUSE RESOLUTION
REQUESTING THE DEPARTMENT OF THE ATTORNEY GENERAL TO DETERMINE WHETHER LEASES BETWEEN RELATED CAR RENTAL ENTITIES ARE EXEMPT FROM THE GENERAL EXCISE TAX AND IF SO, REQUESTING THE DEPARTMENT OF TAXATION TO APPLY THE EXEMPTION.
WHEREAS, the car rental business is an integral and necessary part of the tourism industry in Hawaii; and
WHEREAS, car rental agencies lease their vehicles at retail rates to the public and pay the general excise tax on the rental revenues from these transactions to the State; and
WHEREAS, the car rental industry often involves payments between related entities that are subject to the general excise tax; and
WHEREAS, the current general excise tax law exempts many intercompany transactions from the general excise tax, including charges for the use of capital as specified in section 237-23.5(a), Hawaii Revised Statutes; and
WHEREAS, some car rental companies use special purpose financing entities, which they own, that issue asset-backed debt instruments that are secured by the rental vehicles, which are then leased to the related operating car rental agencies; and
WHEREAS, the revenues from these leases are used to pay the debt service required of those instruments; and
WHEREAS, section 237-23.5, Hawaii Revised Statutes, exempts from the general excise tax the flow of revenues between related entities for the use of capital; and
WHEREAS, the Department of Taxation however, currently collects an additional excise tax on the lease revenues from the car rental agency paid to the special purpose financing entity even though the agency and the special purpose financing entity are owned by the same company; and
WHEREAS, a finding that the leases used in the financing of the acquisition and replacement of car rental vehicles between related entities should be exempt from the excise tax would not exempt car rental agencies from collecting and paying the general excise tax on the revenues generated from the renting of vehicles to the public; and
WHEREAS, in general, other states do not impose sales, use, and excise taxes on intercompany lease payments; now, therefore,
BE IT RESOLVED by the House of Representatives of the Twenty-fourth Legislature of the State of Hawaii, Regular Session of 2007, that the Department of the Attorney General is requested to conduct a study on whether leases between related entities in the car rental industry for the acquisition and replacement of vehicles under section 237-23.5, Hawaii Revised Statutes, are:
(1) Used solely for the purpose of acquiring and replacing car rental vehicles;
(2) Transactions among related entities as currently defined; and
(3) Transactions similar to intercompany car rental company leasing transactions that are exempt from sales, use, and excise taxes in other states; and
BE IT FURTHER RESOLVED that if the answers to subparagraphs (1), (2), and (3) are in the affirmative, the Department of Taxation is requested to apply the exemption provided by section 237-23.5, Hawaii Revised Statutes, to revenues generated by intercompany car rental acquisitions and replacements if car rental agencies lease vehicles from special purpose financing entities and both are related entities; and
BE IT FURTHER RESOLVED that the Department of the Attorney General is requested to submit a report of its findings and recommendations, including suggested legislation, to the Legislature not later than twenty days before the convening of the Regular Session of 2008; and
BE IT FURTHER RESOLVED that certified copies of this Resolution be transmitted to the Governor, Attorney General, and Director of Taxation.
Requesting the Department of the Attorney General to determine whether intercompany car rental leases are exempt from the general excise tax and if so, requesting the Department of Taxation to apply the exemption.