STAND. COM. REP. NO. 354

Honolulu, Hawaii

RE:    S.B. No. 1007

       S.D. 1

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fourth State Legislature

Regular Session of 2007

State of Hawaii

Madam:

     Your Committee on Economic Development and Taxation, to which was referred S.B. No. 1007, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO THE GENERAL EXCISE TAX,"

begs leave to report as follows:

     The purpose of this measure is to require an investment broker and agent who share compensation for their services to pay the general excise tax on only that portion of the compensation retained by each.

     Your Committee received testimony in support of this measure from the National Association of Insurance and Financial Advisors Hawaii, Linsco/Private Ledger Corporation, SunAmerica Securities Inc., and one individual.

     Your Committee received comments on this measure from the Department of Taxation and the Tax Foundation of Hawaii.

     Your Committee finds that this measure would extend the general excise tax (GET) provisions on commissions, which are currently available to insurance agents and real estate brokers and salespeople, to securities professionals who sell a commissionable product.

     Your Committee received a revenue impact statement from the Department of Taxation that the proposal is estimated to cost $1,400,000 annually.

     In its methodology, the Department of Taxation stated that data on GET collected on non-insurance commissions was used to make the estimates, with adjustments made to remove real estate and other commissions.

     Your Committee is in support of this measure to "level the playing field" regarding the payment of GET on certain commissions.  Your Committee notes that in a case on this subject before the Oahu Board of Tax Appeals, the Department of Taxation lost and the Board found that the general excise tax on commissions should be only on the portion retained by the broker and by the agent.

     As affirmed by the record of votes of the members of your Committee on Economic Development and Taxation that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1007, S.D. 1, and recommends that it be referred to the Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Economic Development and Taxation,

____________________________

CAROL FUKUNAGA, Chair