STAND. COM. REP. NO. 952

Honolulu, Hawaii

RE:    H.B. No. 828

       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 Committees on Economic Development and Technology and Judiciary and Labor, to which was referred H.B. No. 828, H.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

beg leave to report as follows:

     The purpose and intent of this measure is to:

     (1)  Establish conditions for inspections of required records and receipts of cash business transactions;

     (2)  Clarify state of mind for a violation of record and receipt requirements;

     (3)  Allow business transaction records to be hand written or generated by a manually operated or electronic cash register;

     (4)  Limit to $100 the fine for a violation if the person is otherwise in compliance with tax laws; and

     (5)  Repeal the failure to record transaction by register provisions.

     Your Committees received testimony in opposition to this measure from the Department of Taxation.  Your Committees received comments on this measure from the Tax Foundation of Hawaii.

     Your Committees have heard concerns raised by the Department of Taxation that this measure would impede the Department's efforts to collect general excise taxes owed to the State, particularly those identified as due from the "cash economy".  Your Committees are in agreement that some of the provisions in this measure would hamper the work of the Department's Special Enforcement Section, and have amended this measure accordingly.

     However, your Committees are also concerned that the Department of Taxation does not have sufficient statistical information to determine how effective their current efforts have been to meet the expectations of Act 134, Session Laws of Hawaii 2009, the "Cash Economy Enforcement Act of 2009".  As such, your Committees encourage the Department to provide the public with more comprehensive information regarding the success of the Act, particularly the realization of additional general excise tax revenue for the State.

     Your Committees have amended this measure by:

     (1)  Deleting section 1, which would have established conditions for inspections of required records and receipts of cash business transactions;

     (2)  Deleting "knowingly" from the provisions related to failure to record receipts and records of business transactions; and

     (3)  Limiting fines for violations if a person is otherwise in compliance with tax laws to a level commensurate with the violation, as determined by the Department of Taxation in accordance with rules adopted under chapter 91, Hawaii Revised Statutes.

     As affirmed by the records of votes of the members of your Committees on Economic Development and Technology and Judiciary and Labor that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 828, H.D. 2, as amended herein, and recommend that it pass Second Reading in the form attached hereto as H.B. No. 828, 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 Committees on Economic Development and Technology and Judiciary and Labor,

____________________________ CLAYTON HEE, Chair

____________________________ CAROL FUKUNAGA, Chair