SB1034 HD1

THE SENATE	S.B. NO.	1034
TWENTY-FOURTH LEGISLATURE, 2007		S.D. 2
STATE OF HAWAII		H.D. 1

A BILL FOR AN ACT

RELATING TO TAXATION.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that a healthy inter-island airline industry is vital to the State's economy. Hawaii's inter-island airlines continue to face severe financial challenges. Fuel costs in particular have skyrocketed and grown volatile in recent years. In fact, for most airlines, the cost of fuel has surpassed labor as the highest operating cost factor.

Sales of fuel sold from a foreign-trade zone for use by airlines traveling out of the State of Hawaii are exempt from general excise and use taxes. However, intrastate flights are not exempt. To the extent that the Hawaii general excise and use taxes apply to intrastate flights, these taxes only exacerbate the problem for Hawaii airlines.

The legislature finds that exempting common carriers from the general excise and use taxes for sales of fuel from a foreign trade zone for intrastate flights would level the playing field and create a fairer market for all airlines.

The purpose of this Act is to exempt common carriers from the general excise and use taxes for fuel for use in intrastate transportation.

SECTION 2. Section 212-8, Hawaii Revised Statutes, is amended to read as follows:

"§212-8 Exemption from taxes. (a) Notwithstanding any law to the contrary, sales of all products [~~which~~] that are categorized as privileged foreign merchandise, nonprivileged foreign merchandise, domestic merchandise, or zone-restricted merchandise, and [~~which~~] that are admitted into a foreign-trade zone, as more specifically set forth in the Act of Congress, and any rules and regulations promulgated thereunder, made directly to any common carrier in interstate or foreign commerce, or both, whether ocean-going or air, for consumption out-of-state by the crew or passengers on the shipper's vessels or airplanes, or for use out-of-state by the vessels or airplanes, shall be exempt from those taxes imposed under chapters 237, 238, 243, 244D, and 245.

(b) Notwithstanding any law to the contrary, sales of fuel categorized as privileged foreign merchandise, non-privileged foreign merchandise, domestic merchandise, or zone-restricted merchandise, that is admitted into a foreign-trade zone, as more specifically set forth by an Act of Congress and any rules and regulations thereunder, made directly to or used by any common carrier for consumption or use in air transportation, whether interstate, intrastate, or foreign, shall be exempt from not more than $3,800,000 annually in taxes imposed under chapters 237 and 238."

SECTION 3. Section 237-24.75, Hawaii Revised Statutes, is amended to read as follows:

"[[]§237-24.75[]] Additional exemptions. In addition to the amounts exempt under section 237-24, this chapter shall not apply to [~~amounts~~]:

(1) Amounts received as a beverage container deposit collected under chapter 342G, part VIII[.]; and

(2) Amounts received from the sale of fuel and exempted by section 212-8(b)."

SECTION 4. Section 238-3, Hawaii Revised Statutes, is amended by amending subsection (g) to read as follows:

"(g) The tax imposed by this chapter shall not apply to [~~any~~]:

(1) Any intoxicating liquor as defined in chapter 244D and cigarettes and tobacco products as defined in chapter 245, imported into the State and sold to any person or common carrier in interstate commerce, whether ocean-going or air, for consumption out-of-state by the person, crew, or passengers on the shipper's vessels or airplanes[.]; and

(2) Sales of fuel exempted under section 212-8(b)."

SECTION 5. The department of taxation shall report to the legislature not later than twenty days prior to the convening of the regular session of 2008, regarding the revenue loss in the first year during which this Act is in effect.

SECTION 6. This Act shall not be construed to imply that any law in effect prior to the effective date of this Act is inconsistent with this Act.

SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 8. This Act shall take effect on July 1, 2020, and shall be repealed on December 31, 2009.