STAND. COM. REP. NO. 3517

Honolulu, Hawaii

RE:    S.C.R. No. 163

       S.D. 1

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fourth State Legislature

Regular Session of 2008

State of Hawaii

Madam:

     Your Committee on Ways and Means, to which was referred S.C.R. No. 163, S.D. 1, entitled:

"SENATE CONCURRENT RESOLUTION REQUESTING THE DEPARTMENT OF TAXATION TO EXAMINE THE PAYMENT OF GENERAL EXCISE TAXES ON ALL COMMISSIONS EARNED BY MANUFACTURER'S SALES REPRESENTATIVES FROM SALES OF IMPORTED TANGIBLE PERSONAL PROPERTY THAT IS PURCHASED BY A CONSUMER DIRECTLY FROM THE MANUFACTURER,"

begs leave to report as follows:

     The purpose of this measure is to request the Department of Taxation to examine the general excise tax assessed on commissions earned by a manufacturer's sales representative for the sale of imported tangible personal property that is purchased by a consumer directly from the manufacturer.

     Your Committee received comments on this measure from the Department of Taxation.

Your Committee finds a disturbing inequity with respect to the assessment of the general excise tax on the sale of an out-of-state manufacturer's product in Hawaii.  If a manufacturer's product is sold locally to a consumer by the manufacturer's representative, the general excise tax is assessed on the representative at a rate of one-half of one per cent.  But, if the consumer orders the same product directly from the manufacturer, the sales representative is assessed a general excise tax of four and one-half per cent.  To the detriment of the sales representative, the same manufacturer's product sold to the same consumer results in differing applications of the general excise tax.

Before taking legislative action on this matter, however, your Committee believes that the Legislature would benefit from the Department of Taxation's expertise, analysis, and recommendations on this issue to ultimately provide relief to manufacturer's representatives.

     As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee concurs with the intent and purpose of S.C.R. No. 163, S.D. 1, and recommends its adoption.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

____________________________

ROSALYN H. BAKER, Chair