SB2371

Report Title:

General Excise Tax Holiday

Description:

Provides a general excise tax holiday for purchases of clothing or footwear priced less than $100.

THE SENATE	S.B. NO.	2371
TWENTY-FIRST LEGISLATURE, 2002
STATE OF HAWAII

A BILL FOR AN ACT

relating to a general excise tax holiday to stimulate hawaii's economy.

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 retail 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 it's 6.25 per cent state sales tax-along with all local sales taxes--on clothing and footwear under $100. New York and Florida 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.

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 shall not be levied, assessed, or collected on the sale of clothing or footwear if the sales price of the article is less than $100, and the sale takes place during one period per year as designated by the department of taxation. This period shall commence at 12:01 a.m. on a Friday and end at 12:00 p.m. midnight the following Sunday; provided that the exemption from taxation under 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, 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 of $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;

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

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

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

(d) Articles that are normally sold as a unit must continue to be sold in that manner, and may not be priced separately and sold as individual items in order to obtain the exemption.

(e) When exempt clothing 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 prices of an item. If the discount reduces the sales price to $99.99 or less, the item shall qualify 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", may not 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. The department may further clarify the items that are exempt under this section."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect upon approval; provided that section 2 shall take effect upon enactment of federal legislation reimbursing the state for all taxes exempted from collection pursuant to this Act and shall apply to purchases made six months after enactment of the federal legislation.

INTRODUCED BY:	_____________________________