STAND. COM. REP. NO. 770-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 2604
                                     H.D. 2




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Finance, to which was referred H.B. No.
2604, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose of this bill is to:

     (1)  Impose the use tax on contracting imported for resale
          or use in Hawaii;

     (2)  Provide pyramiding relief from the general excise tax
          for the sale of amusements;

     (3)  Provide a lower public service company tax rate on
          telecommunications services and transportation services
          that are resold; and

     (4)  Make technical amendments to statutory provisions
          enacted under Acts 70 and 71, Session Laws of Hawaii
          1999.

     The Department of Taxation, AT&T, and the Hawaii Bankers
Association testified in support of this measure.  The Hawaii
Technology Trade Association testified in support of the intent
of this measure.  Comments were submitted by the Tax Foundation
of Hawaii, the Tax Committee of the Hawaii Society of Certified
Public Accountants, GTE Hawaiian Tel, Honolulu Freight Service,
Emery Worldwide, and Con-Way Transportation Systems.

 
 
                                 STAND. COM. REP. NO. 770-00
                                 Page 2

 
     Your Committee has amended this bill by:

     (1)  Deleting the percentage amounts for phased-in
          depyramiding of the public service company tax rates
          for:

          (a)  Public utilities that sell telecommunication
               services to persons who resell such products and
               services; and

          (b)  Motor carriers or contract carriers;

     (2)  Amending the definition of "use" with regard to the use
          tax exclusion;

     (3)  Specifying that for services provided by motor carriers
          or contract carriers to contractors, as defined in
          section 237-6, Hawaii Revised Statutes (HRS), the
          benefit of the service passes to the customer of the
          contractor as an identifiable element of the
          contracting or service provided by the contractor and
          does not constitute overhead as defined in section 237-
          1, HRS; and

     (4)  Making technical, nonsubstantive amendments for
          clarity, consistency, and style.

     As affirmed by the record of votes of the members of your
Committee on Finance that is attached to this report, your
Committee is in accord with the intent and purpose of H.B. No.
2604, H.D. 1, as amended herein, and recommends that it pass
Third Reading in the form attached hereto as H.B. No. 2604, H.D.
2.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Finance,



                                   ______________________________
                                   DWIGHT Y. TAKAMINE, Chair