HOUSE OF REPRESENTATIVES	H.B. NO.	2781
THIRTY-SECOND LEGISLATURE, 2024
STATE OF HAWAII

A BILL FOR AN ACT

relating to taxation.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that Act 247, Session Laws of Hawaii 2005, established the county surcharge on state tax to provide an initial funding source for certain county transportation projects. Subsequently, Act 48, Session Laws of Hawaii 2023, amended the county surcharge on state tax to allow the funding of housing infrastructure. The county surcharge on state tax is scheduled to be repealed on December 31, 2030. The legislature notes that the counties will have six years to find alternative revenue sources to support programs that are currently funded by the county surcharge on state tax.

The purpose of this Act is to, upon the repeal of the county surcharge on state tax, establish a successor surcharge on the general excise and use taxes to provide:

(1) Funding for statewide universal preschool;

(2) Supplemental funding to the department of education for K-12 school purposes; and

(3) Funding for the provision of social services in the State.

SECTION 2. Section 237-8.6, Hawaii Revised Statutes, is amended to read as follows:

"§237-8.6 [County surcharge] Surcharge on [state] general excise tax; administration. (a) [The county] Beginning January 1, 2031, a surcharge on [state tax, upon the adoption of county ordinances and in accordance with the requirements of section 46-16.8,] the taxes imposed under this chapter shall be levied, assessed, and collected as provided in this section on all gross proceeds and gross income taxable under this chapter. [No county shall set the] The surcharge [on state tax at a] rate [greater than] shall be equal to one-half per cent of all gross proceeds and gross income taxable under this chapter. All provisions of this chapter shall apply to the [county] surcharge [on state tax]. With respect to the surcharge, the director of taxation shall have all the rights and powers provided under this chapter. In addition, the director of taxation shall have the exclusive rights and power to determine the county or counties in which a person is engaged in business and, in the case of a person engaged in business in more than one county, the director shall determine, through apportionment or other means, that portion of the surcharge on state tax attributable to business conducted in each county.

[(b) Each county surcharge on state tax that may be adopted, extended, or amended pursuant to section 46-16.8 shall be levied beginning in a taxable year after the adoption of the relevant county ordinance; provided that no surcharge on state tax may be levied:

(1) Before:

(A) January 1, 2007, if the county surcharge on state tax was established by an ordinance adopted before December 31, 2005;

(B) January 1, 2019, if the county surcharge on state tax was established by the adoption of an ordinance after June 30, 2015, but before June 30, 2018;

(C) January 1, 2020, if the county surcharge on state tax was established by the adoption of an ordinance on or after June 30, 2018, but before March 31, 2019;

(D) January 1, 2024, if the county surcharge on state tax was established by the adoption of an ordinance on or after March 31, 2019, but before August 1, 2023; or

(E) January 1, 2025, if the county surcharge on state tax was established by the adoption of an ordinance on or after August 1, 2023, but before December 31, 2023; and

(2) After December 31, 2030.

(c)] (b) The [county] surcharge on [state] general excise tax[, if adopted,] shall be imposed on the gross proceeds or gross income of all written contracts that require the passing on of the taxes imposed under this chapter; provided that if the gross proceeds or gross income are received as payments beginning in the taxable year in which the taxes become effective, on contracts entered into before June 30 of the year prior to the taxable year in which the taxes become effective, and the written contracts do not provide for the passing on of increased rates of taxes, the [county] surcharge [on state tax] shall not be imposed on the gross proceeds or gross income covered under the written contracts. The [county] surcharge [on state tax] shall be imposed on the gross proceeds or gross income from all contracts entered into on or after June 30 of the year prior to the taxable year in which the taxes become effective, regardless of whether the contract allows for the passing on of any tax or any tax increases.

[(d) No county] (c) The surcharge on [state] general excise tax shall [be established on] not apply to any:

(1) Gross income or gross proceeds taxable under this chapter at the one-half per cent tax rate;

(2) Gross income or gross proceeds taxable under this chapter at the 0.15 per cent tax rate; or

(3) Transactions, amounts, persons, gross income, or gross proceeds exempt from tax under this chapter.

[(e)] (d) The director of taxation shall revise the general excise tax forms to provide for the clear and separate designation of the imposition and payment of the [county] surcharge on [state] general excise tax.

[(f)] (e) The taxpayer shall designate the taxation district to which the [county] surcharge on [state] general excise tax is assigned in accordance with rules adopted by the director of taxation under chapter 91. The taxpayer shall file a schedule with the taxpayer's periodic and annual general excise tax returns summarizing the amount of taxes assigned to each taxation district.

[(g)] (f) The penalties provided by section 231-39 for failure to file a tax return shall be imposed on the amount of surcharge due on the return being filed for the failure to file the schedule required to accompany the return. In addition, there shall be added to the tax an amount equal to ten per cent of the amount of the surcharge and tax due on the return being filed for the failure to file the schedule or the failure to correctly report the assignment of the general excise tax by taxation district on the schedule required under this subsection.

[(h)] (g) All taxpayers who file on a fiscal year basis whose fiscal year ends after December 31 of the year prior to the taxable year in which the taxes become effective, shall file a short period annual return for the period preceding January 1 of the taxable year in which the taxes become effective. Each fiscal year taxpayer shall also file a short period annual return for the period starting on January 1 of the taxable year in which the taxes become effective, and ending before January 1 of the following year."

SECTION 3. Section 238-2.6, Hawaii Revised Statutes, is amended to read as follows:

"§238-2.6 [County surcharge] Surcharge on [state] use tax; administration. (a) [The county] Beginning January 1, 2031, a surcharge on [state tax, upon the adoption of a county ordinance and in accordance with the requirements of section 46-16.8,] the taxes imposed under this chapter shall be levied, assessed, and collected as provided in this section on the value of property and services taxable under this chapter. [No county shall set the] The surcharge [on state tax at a] rate [greater than] shall be equal to one-half per cent of the value of property taxable under this chapter. All provisions of this chapter shall apply to the [county] surcharge [on state tax]. With respect to the surcharge, the director shall have all the rights and powers provided under this chapter. In addition, the director of taxation shall have the exclusive rights and power to determine the county or counties in which a person imports or purchases property and, in the case of a person importing or purchasing property in more than one county, the director shall determine, through apportionment or other means, that portion of the surcharge [on state tax] attributable to the importation or purchase in each county.

[(b) Each county surcharge on state tax that may be adopted, extended, or amended shall be levied beginning in a taxable year after the adoption of the relevant county ordinance; provided that no surcharge on state tax may be levied:

(1) Before:

(A) January 1, 2007, if the county surcharge on state tax was established by an ordinance adopted before December 31, 2005;

(B) January 1, 2019, if the county surcharge on state tax was established by the adoption of an ordinance after June 30, 2015, but before June 30, 2018;

(C) January 1, 2020, if the county surcharge on state tax was established by the adoption of an ordinance on or after June 30, 2018, but before March 31, 2019;

(D) January 1, 2024, if the county surcharge on state tax was established by the adoption of an ordinance on or after March 31, 2019, but before August 1, 2023; or

(E) January 1, 2025, if the county surcharge on state tax was established by the adoption of an ordinance on or after August 1, 2023, but before December 31, 2023; and

(2) After December 31, 2030.

(c) No county] (b) The surcharge on [state] use tax shall [be established upon] not apply to any use taxable under this chapter at the one-half per cent tax rate or upon any use that is not subject to taxation or that is exempt from taxation under this chapter.

[(d)] (c) The director of taxation shall revise the use tax forms to provide for the clear and separate designation of the imposition and payment of the [county] surcharge on [state] use tax.

[(e)] (d) The taxpayer shall designate the taxation district to which the [county] surcharge on [state] use tax is assigned in accordance with rules adopted by the director of taxation under chapter 91. The taxpayer shall file a schedule with the taxpayer's periodic and annual use tax returns summarizing the amount of taxes assigned to each taxation district.

[(f)] (e) The penalties provided by section 231-39 for failure to file a tax return shall be imposed on the amount of surcharge due on the return being filed for the failure to file the schedule required to accompany the return. In addition, there shall be added to the tax an amount equal to ten per cent of the amount of the surcharge and tax due on the return being filed for the failure to file the schedule or the failure to correctly report the assignment of the use tax by taxation district on the schedule required under this subsection.

[(g)] (f) All taxpayers who file on a fiscal year basis whose fiscal year ends after December 31 of the year prior to the taxable year in which the taxes become effective, shall file a short period annual return for the period preceding January 1 of the taxable year in which the taxes become effective. Each fiscal year taxpayer shall also file a short period annual return for the period starting on January 1 of the taxable year in which the taxes become effective, and ending before January 1 of the following year."

SECTION 4. Act 247, Session Laws of Hawaii 2005, as amended by Act 240, Session Laws of Hawaii 2015, as amended by Act 1, First Special Session Laws of Hawaii 2017, is amended by amending section 9 to read as follows:

"SECTION 9. This Act shall take effect upon its approval; provided that:

(1) If none of the counties of the State adopt an ordinance to levy a county surcharge on state tax by December 31, 2005, this Act shall be repealed and section 437D-8.4, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day prior to the effective date of this Act;

(2) If any county does not adopt an ordinance to levy a county surcharge on state tax by December 31, 2005, it shall be prohibited from adopting such an ordinance pursuant to this Act, unless otherwise authorized by the legislature through a separate legislative act; and

(3) If an ordinance to levy a county surcharge on state tax is adopted by December 31, 2005:

(A) The ordinance shall be repealed on December 31, 2022; provided that the repeal of the ordinance shall not affect the validity or effect of an ordinance to extend a surcharge on state tax adopted pursuant to an act of the legislature; and

(B) [This] Sections 2, 5, and 6 of this Act shall be repealed on December 31, 2030, and section 437D‑8.4, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day prior to the effective date of this Act; provided that the amendments made to section 437D-8.4, Hawaii Revised Statutes, by Act 226, Session Laws of Hawaii 2008, as amended by Act 11, Session Laws of Hawaii 2009, and Act 110, Session Laws of Hawaii 2014, shall not be repealed."

SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 6. This Act shall take effect on January 1, 2031.

INTRODUCED BY:

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Report Title:

Surcharge on General Excise Tax; Surcharge on Use Tax

Description:

Establishes a surcharge on general excise and use taxes. Effective 1/1/2031.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.