REPORT TITLE:
General Excise Tax


DESCRIPTION:
Makes it a deceptive trade practice for a business to represent
that the amount of general excise tax due is in excess of the
amount of tax payable by the business, and prohibits businesses
that are subject to the 4% tax from passing on the "tax on tax"
(0.166% in addition to the 4% tax rate) to their customers.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2235 
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO THE GENERAL EXCISE TAX.



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

 1      SECTION 1.  The legislature finds that the State's general
 
 2 excise tax, which is a tax on the gross proceeds of sale levied
 
 3 on enterprises for the privilege of doing business in Hawaii, is
 
 4 a tax on the seller rather than on the buyer.  The tax is imposed
 
 5 on manufacturers, retailers, sellers of tangible personal
 
 6 property, contractors, sales representatives, service businesses,
 
 7 professionals, and other businesses.  Other than commissions from
 
 8 insurance sales and from wholesaling, producing, manufacturing,
 
 9 and certain other services, most gross income is taxed at a four
 
10 per cent rate.
 
11      The legislature finds that most businesses charge customers
 
12 for the general excise tax, since the tax paid by the seller is
 
13 one of the seller's expenses of doing business in the State.
 
14 However, while most businesses generally pass the excise tax on
 
15 to their customers at the regular four per cent rate, some
 
16 businesses pass the excise tax on to their customers at
 
17 compounded rates, such as 4.166 per cent at the retail level.
 
18 These businesses add on an additional 0.166 per cent in order to
 
19 cover the tax on the taxes which they collect.  For example, an
 

 
Page 2                                                     2235 
                                     H.B. NO.           
                                                        
                                                        


 1 item costing $1 has an excise tax of 4 cents.  However, the
 
 2 seller's excise tax on the total ($1.04) is $0.0416, or $1.04
 
 3 multiplied by four per cent.  The seller then charges the buyer
 
 4 4.166 per cent to make up the difference.
 
 5      The legislature finds that shifting this "tax on tax" onto
 
 6 consumers unfairly places the burden of the tax onto those who
 
 7 may be least likely to afford it.  While this amount appears to
 
 8 be small, it adds up for many purchases over time, especially
 
 9 when money is tight for many families in Hawaii's struggling
 
10 economy.  Prohibiting businesses from passing on the 0.166 per
 
11 cent "tax on tax" to their customers will assist the State's
 
12 economic recovery by placing more money back into the hands of
 
13 consumers.
 
14      The purpose of this Act is therefore to make it a deceptive
 
15 trade practice for a business to represent that the amount of
 
16 general excise tax due is in excess of the amount of tax payable
 
17 by the business, and to specifically prohibit businesses from
 
18 passing the "tax on tax" on to purchasers.
 
19      SECTION 2.  Chapter 237, Hawaii Revised Statutes, is amended
 
20 by adding a new section to be appropriately designated and to
 
21 read as follows:
 
22      "§237-    "Tax on tax" prohibited; deceptive trade practice.
 

 
 
 
Page 3                                                     2235 
                                     H.B. NO.           
                                                        
                                                        


 1 A licensee under this chapter shall not collect from a purchaser
 
 2 of goods or services included in the gross receipts that are
 
 3 subject to this chapter any amount of tax on those goods or
 
 4 services in excess of four per cent.  A violation of this section
 
 5 is a deceptive trade practice under section 481A-3."
 
 6      SECTION 3.  Section 481A-3, Hawaii Revised Statutes, is
 
 7 amended by amending subsection (a) to read as follows:
 
 8      "(a)  A person engages in a deceptive trade practice when,
 
 9 in the course of the person's business, vocation, or occupation,
 
10 the person: 
 
11      (1)  Passes off goods or services as those of another; 
 
12      (2)  Causes likelihood of confusion or of misunderstanding
 
13           as to the source, sponsorship, approval, or
 
14           certification of goods or services; 
 
15      (3)  Causes likelihood of confusion or of misunderstanding
 
16           as to affiliation, connection, or association with, or
 
17           certification by, another; 
 
18      (4)  Uses deceptive representations or designations of
 
19           geographic origin in connection with goods or services; 
 
20      (5)  Represents that goods or services have sponsorship,
 
21           approval, characteristics, ingredients, uses, benefits,
 
22           or quantities that they do not have or that a person
 

 
 
 
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                                     H.B. NO.           
                                                        
                                                        


 1           has a sponsorship, approval, status, affiliation, or
 
 2           connection that the person does not have; 
 
 3      (6)  Represents that goods are original or new if they are
 
 4           deteriorated, altered, reconditioned, reclaimed, used,
 
 5           or secondhand; 
 
 6      (7)  Represents that goods or services are of a particular
 
 7           standard, quality, or grade, or that goods are of a
 
 8           particular style or model, if they are of another; 
 
 9      (8)  Represents to any purchaser of goods or services
 
10           subject to chapter 237 that the amount of tax on those
 
11           goods or services is in excess of four per cent;
 
12     [(8)] (9)  Disparages the goods, services, or business of
 
13           another by false or misleading representation of fact; 
 
14     [(9)] (10)  Advertises goods or services with intent not to
 
15           sell them as advertised; 
 
16    [(10)] (11)  Advertises goods or services with intent not to
 
17           supply reasonably expectable public demand, unless the
 
18           advertisement discloses a limitation of quantity; 
 
19    [(11)] (12)  Makes false or misleading statements of fact
 
20           concerning the reasons for, existence of, or amounts of
 
21           price reductions; or 
 
22    [(12)] (13)  Engages in any other conduct which similarly
 

 
 
 
Page 5                                                     2235 
                                     H.B. NO.           
                                                        
                                                        


 1           creates a likelihood of confusion or of
 
 2           misunderstanding."
 
 3      SECTION 4.  Statutory material to be repealed is bracketed.
 
 4 New statutory material is underscored.
 
 5      SECTION 5.  This Act shall take effect on July 1, 2000.
 
 6 
 
 7                           INTRODUCED BY:_________________________