STAND. COM. REP. NO. 421

Honolulu, Hawaii

, 2025

RE: H.B. No. 939

H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

Your Committee on Consumer Protection & Commerce, to which was referred H.B. No. 939 entitled:

"A BILL FOR AN ACT RELATING TO ALCOHOL,"

begs leave to report as follows:

The purpose of this measure is to establish a liquor tax rate for low alcohol by volume spirits beverages.

Your Committee received testimony in support of this measure from Maui Wine, Ltd.; Lanikai Brewing Co.; Kauai Beer Company; Kauaʻi Island Brewing Co.; Maui Brewing Co.; Johnson Brothers of Hawaii, Inc.; and one individual. Your Committee received testimony in opposition to this measure from the Beer Institute; Wine Institute; and Hawaiʻi Alcohol Policy Alliance. Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

Your Committee finds that spirits based low-proof, ready-to-drink beverages are taxed at a rate of $5.98 a gallon, or more than six times higher than malt beverages and beer with similar alcohol by volume. This dramatic difference in the taxation of products with similar alcohol content creates an unfair marketplace. This measure adjusts the tax rate for low-proof spirits-based beverages to be comparable to other low-proof beverages.

Your Committee has amended this measure by:

(1) Increasing the tax rate proposed for low alcohol by volume spirits beverages, from 85 cents to 93 cents per wine gallon;

(2) Changing the effective date to July 1, 3000, to encourage further discussion; and

(3) Inserting a three-year sunset date of December 31, 2028.

Your Committee notes that the Department of Taxation, in its written testimony before your Committee, requested that the new tax proposed by this measure begin on January 1, 2026, to allow the Department sufficient time to implement the measure's provisions.

As affirmed by the record of votes of the members of your Committee on Consumer Protection & Commerce that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 939, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 939, H.D. 1, and be referred to your Committee on Finance.

Respectfully submitted on behalf of the members of the Committee on Consumer Protection & Commerce,

____________________________

SCOT Z. MATAYOSHI, Chair