THE SENATE	S.B. NO.	377
THIRTY-THIRD LEGISLATURE, 2025
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 the current application of the State's general excise tax on medical services imposes additional financial burdens on residents seeking essential health care. Unlike many other states that exempt medical services from sales tax, Hawaii includes these services under general excise tax law, increasing health care costs for residents. Research indicates that exempting medical services from taxation can enhance health care affordability by reducing out-of-pocket expenses for patients, making health care more accessible, especially for low- and middle-income families. Lower health care costs also encourage individuals to seek timely medical attention, leading to early detection and treatment of health issues and improving overall public health.

The legislature also finds that exempting medical services from the general excise tax would alleviate financial pressures on health care providers, enabling them to allocate more resources toward patient care and potentially address the shortage of medical professionals in the State. While the State may experience an estimated $222,000,000 reduction in tax revenue annually, studies suggest that the State's existing budget surplus could accommodate this change without adversely affecting public services.

Accordingly, the purpose of this Act is to exempt medical services from the general excise tax to reduce health care costs for residents, promote timely access to medical care, and support health care providers in delivering essential services. By aligning the State's tax policy with that of numerous other states, this Act seeks to enhance the overall well-being of the State's population and ensure that financial barriers do not impede access to necessary health care.

SECTION 2. Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§237-   Exemption of medical services. (a) There shall be exempted from, and excluded from the measure of, the taxes imposed by this chapter all of the gross proceeds arising from the sale of medical services.

(b) For the purposes of this section:

"Cosmetic medical procedure" means any medical procedure performed on an individual that is directed at improving the individual's appearance and that does not meaningfully promote the proper function of the body or prevent or treat illness or disease. "Cosmetic medical procedure" does not include reconstructive surgery.

"Medical services" means professional services provided by hospitals, medical clinics, and facilities that are licensed by the appropriate state agencies and services rendered under chapters 436E, 442, 447, 448, 448B, 451A, 451J, 451K, 452, 453, 453D, 455, 457, 457A, 457G, 458, 459, 461, 461J, 463E, 465, 465D, 466D, 466J, or 468E. "Medical services" does not include services in connection with a cosmetic medical procedure.

"Reconstructive surgery" includes any surgery performed on abnormal structures caused by or related to congenital defects, developmental abnormalities, trauma, infection, tumors or disease, including procedures to improve function or give a more normal appearance."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect on July 1, 2025.

INTRODUCED BY:

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Report Title:

General Excise Tax; Medical Services; Exemption

Description:

Exempts medical services from the general excise tax.

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