STAND. COM. REP. NO. 3225

Honolulu, Hawaii

RE:    S.C.R. No. 164

Honorable Ronald D. Kouchi

President of the Senate

Twenty-Eighth State Legislature

Regular Session of 2016

State of Hawaii

Sir:

     Your Committee on Economic Development, Environment, and Technology, to which was referred S.C.R. No. 164 entitled:

"SENATE CONCURRENT RESOLUTION REQUESTING THE DEPARTMENT OF BUSINESS, ECONOMIC DEVELOPMENT, AND TOURISM, IN CONSULTATION WITH THE DEPARTMENT OF BUDGET AND FINANCE, AND DEPARTMENT OF TAXATION, TO CONDUCT A STUDY ON THE ECONOMIC IMPACT OF GRANTING AN EXEMPTION FOR THE SALE OF GOODS AND SERVICES TO THE FEDERAL GOVERNMENT FROM THE STATE GENERAL EXCISE TAX,"

begs leave to report as follows:

     The purpose and intent of this measure is to request the Department of Business, Economic Development, and Tourism, in consultation with the Department of Budget and Finance and Department of Taxation, to conduct a study on the economic impact of granting an exemption for the sale of goods and services to the federal government from the state general excise tax.

     Your Committee received testimony in support of this measure from Ho‘omana Pono, LLC.  Your Committee received comments on this measure from the Department of Business, Economic Development, and Tourism; and Department of Taxation.

     Your Committee finds that the federal government purchases goods and services from Hawaii businesses and out-of-state businesses for use and consumption within the State.  The federal government does not enforce the State's general excise tax on goods and services purchased from out-of-state small businesses and used and consumed within the State, while Hawaii businesses are assessed a state general excise tax rate of four percent on the sale of goods and services to the federal government, and another half percent surcharge for sales on Oahu, placing Hawaii businesses at a disadvantage.  Your Committee finds that it is necessary for Hawaii businesses to be on the same footing as out-of-state businesses when bidding on federal government contracts and therefore supports a study to determine the potential impacts of exempting the sale of goods and services to the federal government from the State's general excise tax.

     As affirmed by the record of votes of the members of your Committee on Economic Development, Environment, and Technology that is attached to this report, your Committee concurs with the intent and purpose of S.C.R. No. 164 and recommends that it be referred to your Committee on Ways and Means.

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

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GLENN WAKAI, Chair