STAND. COM. REP. NO.  862

Honolulu, Hawaii

                , 2011

RE:   H.B. No. 848

      H.D. 2

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Sixth State Legislature

Regular Session of 2011

State of Hawaii

Sir:

     Your Committee on Finance, to which was referred H.B. No. 848, H.D. 1, entitled:

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

begs leave to report as follows:

     The purpose of this bill is to exempt from the state general excise tax, amounts received by a common paymaster that are disbursed as remuneration to employees of two or more related persons where the common paymaster is making the remunerations on behalf of the related persons.

     The Chamber of Commerce of Hawaii and numerous concerned individuals supported this bill.  The Department of Taxation opposed this bill.  The Tax Foundation of Hawaii and several concerned individuals provided comments.

     Your Committee has amended this bill as follows:

     (1)  In the proposed amendment to section 237-23.5(a), two references to section 267 of the Internal Revenue Code were deleted because section 267 of the Internal Revenue Code does not use the term "related entity;

     (2)  Deleting the word "reimbursable" in the definition for "Services" because reimbursements are exempt from general excise tax under section 237-20; and

     (3)  Making technical, nonsubstantive amendments for clarity, consistency, and style.

     As affirmed by the record of votes of the members of your Committee on Finance that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 848, H.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as H.B. No. 848, H.D. 2.

Respectfully submitted on behalf of the members of the Committee on Finance,

____________________________

MARCUS R. OSHIRO, Chair