HB1794 HD1

Report Title:

General Excise Tax; Holiday

Description:

Establishes an annual general excise tax holiday for consumers and businesses that sell clothing under $100; provided that businesses pass the savings on to consumers; provided further that federal legislation is enacted that fully reimburses the State for taxes not collected under this Act. (HB1794 HD1)

HOUSE OF REPRESENTATIVES	H.B. NO.	1794
TWENTY-FIRST LEGISLATURE, 2002		H.D. 1
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO A GENERAL EXCISE TAX HOLIDAY.

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

SECTION 1. The terrible tragedies in New York City, Washington, D.C., and Pennsylvania on September 11, 2001, caused by terrorist attacks have stunned the nation and evoked a patriotic spirit among the American people that has not been seen for well over fifty years. In addition, these attacks have had an especially damaging effect on Hawaii's economy: airlines, hotels, and the retail sector have all suffered tremendous losses since the tragedies. Consequently, Hawaii is facing what may be its worst economic crisis in history. As part of the effort to stimulate the economy and restore consumer confidence, the legislature finds that incentives should be given to consumers to support Hawaii's retailers.

One incentive that can be used in Hawaii and which has been used successfully across the United States is a general excise tax holiday on sales of clothing and footwear under $100. For example, Texas has lifted its 6.25 per cent state sales tax--along with all local sales taxes--on clothing and footwear under $100. New York and F1orida already have similar programs.

More importantly, tax holidays have been found to create sales, not merely displace sales from a different time. Many Texas retailers have reported seeing crowds usually seen only during the Christmas selling season. To accommodate all of the shoppers, stores in Texas adopted extended hours, added staff, and offered special promotions usually reserved for the Christmas season. While depressed sales might be expected after a tax holiday, retailers have not noticed fewer sales after a sales spike.

The legislature finds that a similar program in Hawaii would help both consumers and retailers alike, will stimulate retail sales, and give a boost to the State's economy during these times of economic crisis.

The purpose of this Act is to provide consumers with a general excise tax holiday not to exceed three days each year, provided that federal legislation is enacted that fully reimburses the State for taxes not collected under this Act.

SECTION 2. Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§237- Tax holiday. (a) Taxes under this chapter are not due on the sale of clothing or footwear if the sales price of the article to the ultimate consumer is less than $100 and the sale takes place during a period designated by the department of taxation. That period shall commence at 12:01 a.m. on a Friday and end at 12:00 midnight the following Sunday; provided that all savings generated by this section shall be passed on by the seller to the purchaser.

(b) This exemption shall apply to each article of clothing or footwear selling for less than $100 to the ultimate consumer, regardless of how many items are sold on the same invoice to a customer. For example, if a customer purchases two shirts for $80 each, both items qualify for the exemption, even though the customer's total purchase price ($160) exceeds $99.99.

(1) The first $99.99 of an article selling for more than $99.99;

(2) Accessories, including jewelry, handbags, purses, briefcases, luggage, umbrellas, wallets, watches, and similar items carried on or about the human body;

(3) The rental of clothing or footwear;

(4) Taxable services performed on the clothing or footwear, such as repair, remodeling, or maintenance services and cleaning or laundry services;

(5) Purchases of items used to make or repair clothing or footwear, including fabric, thread, yarn, buttons, snaps, hooks, and zippers;

(6) Rebates, layaway sales, rain checks, or exchanges when the exchanges occur before or after the tax holiday period; or

(7) Mail, telephone, or e-mail orders.

(d) Articles that are normally sold as a unit shall continue to be sold in that manner and cannot be priced separately and sold as individual items to obtain the exemption.

(e) When exempt clothing or footwear is sold together with taxable merchandise as a set or single unit, the full price is subject to tax unless the price of the exempt item is separately stated. When exempt clothing is sold in a set that also contains taxable merchandise as a free gift, the exempt clothing may qualify for the exemption.

(f) A retailer may offer discounts to reduce the sales price of an item. If the discount reduces the sales price to $99.99 or less, the item qualifies for the exemption.

(g) The total price of items advertised as "buy one, get one free," or "buy one, get one for a reduced price," cannot be averaged in order for both items to qualify for the exemption.

(h) For purposes of this section, shipping and handling charges shall be included as part of the sales price of the item whether or not separately stated.

(i) The retailer shall not be required to obtain any special license, permit, or other documentation on sales of eligible items during the exemption holiday period. However, the retailer's records shall clearly identify the type of item sold, the date the item was sold, and the sales price of the item.

(j) No special reporting procedures are necessary to report exempt sales made during the exemption holiday period. Sales shall be reported as currently required by law."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval; provided that:

(1) Federal legislation is enacted that fully reimburses the State for all taxes not collected under this Act; and

(2) This Act meets all applicable criteria and standards established by federal legislation to qualify for full federal reimbursement of all taxes not collected under this Act.