THE SENATE                           S.R. NO.              19
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                    SENATE  RESOLUTION

  REQUESTING A STUDY ON THE ISSUES AND IMPLICATIONS OF
    INSTITUTING A TAX ON ELECTRONIC COMMERCE.



 1        WHEREAS, the recent advent of the Internet is radically
 2   changing the way people work, communicate, and conduct daily
 3   commercial transactions; and
 4   
 5        WHEREAS, this rapid transition to a digital economy
 6   seriously threatens the tax base that supports basic, vital
 7   public services in our State and communities; and
 8   
 9        WHEREAS, many large businesses are frustrated with the
10   complexity and inefficiency of sales tax jurisdictions across
11   the country, while certain local businesses, under the Internet
12   Tax Freedom Act, are now carrying a disproportionate tax
13   burden; and
14   
15        WHEREAS, in 1998, Congress passed and President Clinton
16   signed the Internet Tax Freedom Act to place a three-year
17   moratorium on electronic commerce by state and local
18   governments; and
19   
20        WHEREAS, the Advisory Commission on Electronic Commerce,
21   created by the Act, was charged with submitting a report with
22   policy and legislative recommendations on electronic commerce
23   taxation this year; and
24   
25        WHEREAS, given the significance of sales and use taxes in
26   their jurisdictions, representatives of state and local
27   government organizations have actively campaigned to preserve
28   their rights and to determine whether or not to tax electronic
29   commerce; and
30   
31        WHEREAS, vital state and local government services to
32   citizens are at risk if tax-free electronic commerce continues
33   and further erodes the tax base; and
34   
35        WHEREAS, state and local policy-makers need to understand
36   the administrative burdens, ranging from registration to
37   collecting taxes, imposed on remote sellers by more than 7,000
38   sales and use tax jurisdictions; and
39   
40        WHEREAS, state and local governments should provide

 
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                                  S.R. NO.              19
                                                        
                                                        


 1   meaningful solutions to such administrative problems by
 2   adopting sales and use tax reforms before Congress places a
 3   permanent ban on electronic commerce taxation by state and
 4   local governments; and
 5   
 6        WHEREAS, before the moratorium became effective, several
 7   states were in the process of formulating Internet taxation
 8   policies and other states were attempting to reach an agreement
 9   with the Direct Marketing Association in order to collect use
10   taxes on out-of-state purchases located in the states signing
11   the agreement; and
12   
13        WHEREAS, working groups in several states have produced
14   reports on electronic commerce and sales taxes, including
15   California, Michigan, Minnesota, and Texas, which suggest
16   options for changing the sales and use tax system; now,
17   therefore,
18   
19        BE IT RESOLVED by the Senate of the Twentieth Legislature
20   of the State of Hawaii, Regular Session of 2000, that the
21   Department of Taxation and the Department of Business, Economic
22   Development, and Tourism are requested to study the issues and
23   implications of instituting a tax on electronic commerce; and
24   
25        BE IT FURTHER RESOLVED that the study shall include a
26   review of the options being considered by other states, as well
27   as any actions that may be proposed by Congress in regards to
28   the moratorium on electronic commerce taxation and any other
29   legislation that may be under discussion with regards to
30   taxation of electronic commerce; and
31   
32        BE IT FURTHER RESOLVED that the Department of Taxation and
33   the Department of Business, Economic Development, and Tourism
34   report to the Legislature on their findings and recommendations
35   twenty days prior to the convening of the Regular Session of
36   2001; and
37   
38        BE IT FURTHER RESOLVED that certified copies of this
39   Resolution be transmitted to the Director of Taxation and the
40   Director of Business, Economic Development, and Tourism.
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44                         OFFERED BY:  ____________________________