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THE SENATE |
S.C.R. NO. |
62 |
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TWENTY-FOURTH LEGISLATURE, 2007 |
S.D. 1 |
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STATE OF HAWAII |
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SENATE CONCURRENT
RESOLUTION
REQUESTING THE DEPARTMENT OF TAXATION TO CONDUCT A REVIEW OF how other states and jurisdictions ensure that warranties and maintenance agreements are either exempted from payment of additional taxes or taxed at the wholesale rate.
WHEREAS, in Act 71, Session Laws of Hawaii 1999 (Act 71), the Legislature recognized that pyramiding of the general excise tax (GET) caused an undue burden on businesses, and so phased out the four per cent GET on business-to-business services; and
WHEREAS, as of January 1, 2006, the tax was decreased to 0.5 per cent; and
WHEREAS, Act 71 does not extend to tax due on warranty reimbursements from the manufacturer of a product; and
WHEREAS, as a result, Hawaii automobile dealers are required to pay a 4.712 per cent general excise tax on what customers consider a "free" repair under their new car's warranty coverage; and
WHEREAS, when consumers in Hawaii pay for a new vehicle, the payment covers the warranty protection coverage, which manufacturers provide on new vehicles for a specified period or miles driven; and
WHEREAS, the dealer, by law, pays the GET to the State, and passes the tax along to the consumer in the negotiated final price of the new car; and
WHEREAS, the warranty is part of the product so that the customer has, in effect paid the GET on the car, which includes the service of warranty protection coverage; and
WHEREAS, other states, recognizing that warranty payments to dealers to cover a manufacturer's warranty, include payments for parts and labor, and that these payments should either be excluded from requirements for tax, or taxed at the wholesale rate; now, therefore,
BE IT RESOLVED by the Senate of the Twenty-fourth Legislature of the State of Hawaii, Regular Session of 2007, the House of Representatives concurring, that the Department of Taxation (Department) is requested to conduct a review of how other states and jurisdictions ensure that warranties and maintenance agreements are either exempted from payment of additional taxes or taxed at the wholesale rate; and
BE IT FURTHER RESOLVED as part of its review, that the Department shall propose amendments to applicable Hawaii tax law to make clear that the general excise tax is not due on business-to-business services that fulfill a warranty obligation to the manufacturer; and
BE IT FURTHER RESOLVED that the Department shall report to the Legislature no later than twenty days prior to the Regular Session of 2008 on the results of its review, any proposed legislation for introduction by the Legislature, and the fiscal impact of the legislation; and
BE IT FURTHER RESOLVED that a certified copy of this Concurrent Resolution be transmitted to the Director of Taxation.
Department of Taxation; Other States Warranty Tax Review