STAND. COM. REP. NO. 1439-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: S.B. No. 2289
                                     S.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 S.B. No.
2289, S.D. 2, entitled: 

     "A BILL FOR AN ACT RELATING TO PREPAID TELEPHONE CALLING
     SERVICE,"

begs leave to report as follows:

     The purpose of this bill is to:

     (1)  Subject prepaid telephone services to the use tax by
          defining these services as "property" for purposes of
          the use tax;

     (2)  Clarify that prepaid telephone calling services are
          taxable under the general excise tax in lieu of the
          public service company tax;

     (3)  Clarify that if the sale or recharge of a prepaid
          telephone calling service does not occur at the
          vendor's place of business, it has occurred at the
          customer's shipping or billing address;

     (4)  Clarify that when prepaid telephone calling services
          are sold to a licensed retail merchant, jobber, or
          other licensed seller for resale, the licensed seller
          will be taxed as a wholesaler selling tangible personal
          property.


 
 
 
                                 STAND. COM. REP. NO. 1439-00
                                 Page 2

 
     The Department of Taxation, AT&T, and GTE testified in
support of this measure.  The Tax Foundation of Hawaii submitted
comments.

     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 S.B. No.
2289, S.D. 2, and recommends that it pass Third Reading.

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



                                   ______________________________
                                   DWIGHT Y. TAKAMINE, Chair