STAND. COM. REP. NO. 655

Honolulu, Hawaii

RE:    S.B. No. 401

       S.D. 1

Honorable Donna Mercado Kim

President of the Senate

Twenty-Eighth State Legislature

Regular Session of 2015

State of Hawaii

Madam:

     Your Committee on Ways and Means, to which was referred S.B. No. 401 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose and intent of this measure is to amend the excise tax rate on the sale of large cigars.

     More specifically, this measure amends the excise tax rate on sales of large cigars that occur on or after July 1, 2015, to the lesser of:

     (1)  Fifty cents for each large cigar; or

     (2)  Fifty percent of the wholesale price of each large cigar.

     Your Committee received testimony in support of this measure from the Cigar Association of America, Inc., Cigar Rights of America, Hawaii Cigar Association, Hawaii Farm Bureau, Hawaii Food Industry Association, Kauai Cigar Company, and seventeen individuals.  Your Committee received a petition in support of this measure with the signatures of four hundred fifty individuals.  Your Committee received testimony in opposition to this measure from the Department of Health, American Cancer Society, American Heart Association, American Lung Association in Hawaii, Coalition for a Tobacco-Free Hawaii, and twenty individuals.  Your Committee received comments on this measure from the Department of Taxation and the Tax Foundation of Hawaii.

     This measure adjusts the excise tax on large cigars by amending paragraph (13) of section 245-3(a), Hawaii Revised Statutes, which sets the current excise tax rate on large cigars.  Your Committee notes that by amending the paragraph that sets the existing tax rate, rather than setting out the amended tax rate in a new paragraph, this measure may retroactively repeal the excise tax on large cigars sold, used, or possessed prior to July 1, 2015.  Your Committee finds that such a retroactive repeal is not the intent of this measure.

     Accordingly, your Committee has amended this measure by:

     (1)  Setting out the amended excise tax rate as a new paragraph of section 245-3(a), Hawaii Revised Statutes;

     (2)  Applying the amended excise tax rate to sales of large cigars that occur on or after December 31, 2015; and

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

     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 is in accord with the intent and purpose of S.B. No. 401, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 401, S.D. 1, and be placed on the calendar for Third Reading.

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

________________________________

JILL N. TOKUDA, Chair