HB1874

SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

ENTERTAINMENT SURCHARGE

§ -A Imposition and rates. There is levied and shall be assessed and collected each month a surcharge of per cent beginning on January 1, 2008 on the gross proceeds derived from entertainment services provided in the State. Every operator or owner of an entertainment service shall pay to the State the surcharge imposed in this chapter and comply with the provisions of this chapter as well as any other criteria established by the director of taxation by rule pursuant to chapter 91.

§ -B Certificate of registration. (a) Each operator or owner of an entertainment service, as a condition precedent to engaging or continuing in the business of providing entertainment services in the State shall register with the director of taxation, the name and address of each place of business within the State subject to this chapter.

The operator or owner shall make a one-time payment of $25 for each entertainment service registered under this section; provided that, upon receipt of the paid registration, the director of taxation shall issue a certificate of registration in such form as the director determines, attesting that the registration has been made and paid. The registration shall not be transferable and shall be valid only for the operator or owner in whose name it is issued and for the transaction of business at the place designated therein.

The registration, or in lieu thereof a notice stating where the registration may be inspected and examined, shall at all times be conspicuously displayed at the place for which it is issued.

The registration provided for by this section shall be effective until canceled in writing. Any application for the reissuance of a previously canceled registration identification number shall be regarded as a new registration application and shall be subject to the payment of the one-time registration fee. The director may revoke or cancel any license issued under this chapter for cause as provided by rule under chapter 91.

(b) If the registration is paid in full, the department of taxation shall not refuse to issue a registration or revoke or cancel a registration for the exercise of a privilege protected by the First Amendment of the Constitution of the United States, or for the carrying on of interstate or foreign commerce, or for any privilege the exercise of which, under the Constitution and laws of the United States, cannot be restrained on account of nonpayment of taxes, nor shall section 237D-14 be invoked to restrain the exercise of such a privilege, or the carrying on of such commerce.

(c) Any person who may lawfully be required by the State, and who is required by this chapter, to register as a condition precedent to engaging or continuing in the business of furnishing entertainment services or as an operator or owner subject to taxation under this chapter, who engages or continues in the business without registering in conformity with this chapter, shall be guilty of a misdemeanor. Any director, president, secretary, or treasurer of a corporation who permits, aids, or abets such corporation to engage or continue in business without registering in conformity with this chapter, shall likewise be guilty of a misdemeanor. The penalty for the misdemeanors shall be that prescribed by section 231-34 for individuals, corporations, or officers of corporations, as the case may be, for violation of that section.

§ -C Remittances. All remittances of taxes imposed under this chapter upon an operator or owner subject to this chapter shall be made by cash, bank drafts, cashier's check, money order, or certificate of deposit to the office of the taxation district to which the return was transmitted which shall be deposited to the credit of the general fund.

§ -D Rules. The director of taxation shall adopt rules pursuant to chapter 91 to effectuate this chapter, including rules related to:

(1) Filing of returns, including annual returns;

(2) Reconciliation procedures and forms;

(3) Assessment of tax upon failure to file returns, including limitation periods, exceptions, and extension by agreement;

(4) Overpayment and refunds;

(5) Appeals;

(6) Maintenance of records;

(7) Collection by suit; injunctions; and

(8) Administration and enforcement of this chapter.

§ -E Definitions. As used in this chapter, "entertainment service" means any service that is provided for a fee that involves a performance by an actor, dancer, musician, or other type of trained performer and includes movies, concerts, theaters, or any other type of organized presentation or show that is performed for a fee. Entertainment service also includes:

(1) The actual cost of the entertainment, as well as secondary costs associated with the entertainment, such as food, refreshments, or merchandise purchased at, or is related to the entertainment;

(2) The cost of food and beverages sold at a restaurant; provided that the restaurant provides seating for at least six customers."

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Entertainment service tax credit. (a) There shall be allowed to each resident taxpayer subject to the taxes imposed by this chapter, a refundable entertainment services tax credit that shall be deductible from the resident taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed. The amount of the tax credit shall be equal to the entertainment service surcharge collected from the taxpayer in the year the tax credit is properly claimed; provided that a taxpayer who claims a tax exemption for a minor child may claim the tax credit for the entertainment service surcharge paid by, or on behalf of the minor child.

(b) If the tax credit under this section exceeds the taxpayer's net income tax liability, the excess of credit over liability may be used as a credit against the taxpayer's net income tax liability in subsequent years until exhausted.

All claims, including amended claims, for a tax credit under this section shall be filed on or before the end of the twenty-fourth month following the close of the taxable year for which the credit may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

(1) Shall prepare any forms that may be necessary to claim a credit under this section;

(2) May require the taxpayer to furnish information to determine the validity of the claim for credit made under this section; and

(3) May adopt rules necessary to effectuate the purposes of this section pursuant to chapter 91.

(d) To be eligible for the tax credit, the taxpayer shall be in compliance with all applicable federal, state, and county statutes, rules, and regulations.

(e) As used in this section, the term "entertainment service" shall have the same meaning as that term is defined in section -E."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval and shall apply to taxable years beginning after December 31, 2006.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	1874
TWENTY-FOURTH LEGISLATURE, 2007
STATE OF HAWAII