STAND. COM. REP. NO. 978

Honolulu, Hawaii

RE:    H.B. No. 1183

       H.D. 2

       S.D. 1

Honorable Shan S. Tsutsui

President of the Senate

Twenty-Sixth State Legislature

Regular Session of 2011

State of Hawaii

Sir:

     Your Committee on Economic Development and Technology, to which was referred H.B. No. 1183, H.D. 2, entitled:

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

begs leave to report as follows:

     The purpose and intent of this measure is to:

     (1)  Create a nexus standard for taxing out-of-state businesses on their business activities in Hawaii;

     (2)  Amends the definition of engaging in business to include local affiliate agreements; and

     (3)  Allow out-of-state and in-state businesses to file information regarding sales to residents of the State instead of collecting the general excise tax.

     Your Committee received testimony in support of this measure from the Department of Taxation.  Your Committee received testimony in opposition to this measure from the Direct Marketing Association; Synertech Media LLC; Performance Marketing Association; Internet Alliance; State Privacy and Security Coalition, Inc.; and Natalie J. Iwasa, CPA, Inc.  Your Committee received comments on this measure from the Tax Foundation of Hawaii.

     Your Committee previously heard and amended S.B. No. 1355, which establishes provisions to enable the State to participate in the national Streamlined Sales and Use Tax Agreement, and has amended this measure by deleting its contents and replacing them with the language in S.B. No. 1355, S.D. 1.  As amended, this measure:

     (1)  Adopts amendments to Hawaii tax laws to implement the Streamlined Sales and Use Tax Agreement, to take effect when the State becomes a party to the Streamlined Sales and Use Tax Agreement; and

     (2)  Creates a committee to oversee the Department of Taxation's implementation and administration of, and compliance with the Streamlined Sales and Use Tax Agreement.

     As affirmed by the record of votes of the members of your Committee on Economic Development and Technology that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1183, H.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1183, H.D. 2, S.D. 1, and be referred to the Committee on Ways and Means.

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

____________________________

CAROL FUKUNAGA, Chair