STAND. COM. REP. NO.  457-14

Honolulu, Hawaii

                , 2014

RE:   H.B. No. 1651

Honorable Joseph M. Souki

Speaker, House of Representatives

Twenty-Seventh State Legislature

Regular Session of 2014

State of Hawaii

Sir:

     Your Committee on Judiciary, to which was referred H.B. No. 1651 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

The purpose of this measure is to require the collection of use taxes by sellers of tangible personal property who enter into agreements under which a person in the State refers potential purchasers to the seller, including by an internet link or web site, or performs related services in the State on behalf of the seller.

The Chamber of Commerce of Hawaii testified in support of the measure.  The Department of Taxation and the Tax Foundation of Hawaii submitted comments on the measure.

     Your Committee finds that the Department of Taxation is unable to monitor the majority of transactions to which the existing use tax applies, which hinders its ability to collect the use taxes that are owed to the State.  Your Committee also finds that this measure is an attempt to improve the State's ability to capture taxes owed by out-of-state businesses by specifying the business activities that would constitute a sufficient connection with Hawaii to enable the State to tax these activities.

     As affirmed by the record of votes of the members of your Committee on Judiciary that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1651 and recommends that it pass Second Reading and be referred to the Committee on Finance.

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

____________________________

KARL RHOADS, Chair