HB1310

Report Title:

Sweepstakes Tax; Child Protective Services Foster Children

Description:

Establishes a new chapter administered by DoTax. Requires persons conducting sweepstakes to obtain a permit and pay a sweepstakes tax based on the type of sweepstakes conducted, and provides penalties. Creates a Child Protective Services Foster Child Special Fund to receive the tax and penalties.

HOUSE OF REPRESENTATIVES	H.B. NO.	1310
TWENTY-THIRD LEGISLATURE, 2005
STATE OF HAWAII

A BILL FOR AN ACT

 

relating to sweepstakes.

 

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

SECTION 1. The legislature finds that there are an ever-increasing number of sweepstakes relied upon by manufacturers, merchants, and services which are primarily used to promote the sale of products. The sweepstakes aspects of merchandizing have proven to be effective. Sweepstakes have also proven to be entertaining to vast segments of our island community which do not have the opportunity to participate in games of chance where a fee (or consideration) is paid because, if paid, the sweepstakes might be transformed into an impermissible game of chance, or gambling.

Virtually all states have recently imposed or increased taxes on various aspects of our consumer-oriented economy. One genre is referred to as "sin taxes," or "pleasure taxes," imposed on the sale or consumption of tobacco, alcohol, and various forms of entertainment, such as movies, sports events, and live performances.

The legislature finds that the imposition of a tax on sweepstakes is an appropriate manner of raising public funds without adversely impacting the public interest.

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

SWEEPSTAKES TAX

§ -1 Definitions. Wherever used in this chapter, unless the context otherwise requires:

"Dealer" means a person in any way affiliated with the sponsor who is conducting, participating in, an agent for, or assisting in the performance of a game of chance that has no cost or other consideration paid by the players.

"Department" means the department of taxation.

"Player" means a person who participates or intends to participate in a sweepstakes.

"Sponsor" means any person who holds a permit provided for in section -2 for the purpose of initiating, organizing, or conducting a sweepstakes promotion for whatever purpose, where there is no cost to the player to participate in the game of chance.

"Sweepstakes" means any form of a contest in which players compete for a single prize or multiple prizes to be awarded players, regardless of whether the competition involves skill or chance, where there is no cost or consideration paid by the players to participate, and where the prizes are paid for in whole or in part by the sponsor.

"Use" means any use, whether such use is of such nature as to cause the property to be appreciably consumed or not, or the keeping of such property for such use or for sale, and shall include the exercise of any right or power over tangible personal property incident to the ownership of that property.

§ -2 Permit. (a) It shall be unlawful to conduct sweepstakes promotions unless a permit has been issued under this section to the sponsor and all dealers associated with the sponsor and is in full force and effect throughout the period of time the sweepstakes is conducted, including the time period required to fully distribute all of the prizes mentioned to potential players as an inducement to participate.

(b) The department shall issue a permit to conduct sweepstakes promotions to any person upon the payment of a permit fee of $100.

(c) A permit issued under this section shall expire on June 30 next succeeding the date upon which it is issued unless sooner suspended, surrendered, or revoked for cause by the department. The permit shall be renewed annually before July 1 upon fulfillment of all requirements applicable to the original permit and the payment of a renewal fee of $50; provided that the department may exempt sponsors who obtain a permit before July 1, 2005, from this requirement for the first renewal of the permit. The department may issue a duplicate permit whenever a permit is defaced, destroyed, or lost, or the permitted premises are relocated. The permit shall be conspicuously displayed on the permitted premises of the sponsor, and shall not be assignable.

(d) The department may suspend or after hearing revoke any permit issued under this chapter whenever it finds that the sponsor and any of its dealers has failed to comply with this chapter or any rule adopted pursuant to this chapter. Upon the suspension or revocation of a permit, the department shall immediately notify the sponsor and if a hearing has not already been afforded, afford the sponsor a hearing. After the hearing, the department shall either rescind its order of suspension or revocation, or upon good cause appearing therefor, shall continue the suspension or revoke the permit.

Upon the suspension or revocation of any permit, the sponsor shall immediately surrender the permit or any duplicate thereof to the department. Notwithstanding the foregoing, the sponsor shall be permitted to complete all ongoing sweepstakes promotions until all advertised prizes have been fully distributed, but all advertising and promotion of the sweepstakes shall immediately cease upon the termination, expiration, or revocation of the permit.

§ -3 Sweepstakes tax, imposition. (a) There is imposed a sweepstakes tax on any taxpayer who sponsors a sweepstakes in the state not otherwise taxable under this chapter. The sponsor of the sweepstakes may deduct the amount of the tax from the sweepstakes prize or prizes; provided that the sponsor shall take reasonable measures to inform players that award of the prize is subject to all applicable Hawaii sweepstakes taxes.

(b) If the sweepstakes is a retail sales sweepstakes conducted in association with the retail sale of a product or service, the tax shall be one per cent of the retail price of the item associated with the sweepstakes; provided that purchase of the product or service by the player need not be an essential requirement of participation in the sweepstakes for this subsection to apply.

(c) If the sweepstakes is a sign-up sweepstakes conducted by requiring a player to provide the sponsor or its dealers the player's name, address, phone number, or some other identification of the player, the tax shall be three per cent of the fair market value of the prize or prizes offered or advertised by the sponsor.

(d) Where the nature of the sweepstakes is not readily categorized either as a retail sales or a sign-up sweepstakes, the tax shall be computed by the following formula:

Tax = .02 x FMV x ENP

_______________

10,000

Where:

FMV = The fair market value of all of the prizes advertised, offered, or actually awarded, whichever is the highest value.

ENP = The estimated number of participants, determined by the estimated number of applications to be completed, the number of pull tabs distributed, or any other reasonable basis for projecting the probable number of participants.

§ -4 Records to be kept. (a) Every taxpayer shall keep a record of all sweepstakes conducted, including a reasonably accurate record of the number of persons participating in every sweepstakes promotion, in such form as the department may prescribe. The record shall be offered for inspection and examination upon demand by the department and shall be preserved for a period of two years, except as the department may in writing otherwise allow or require.

(b) The department by rule may require the dealer to keep such other records as it deems necessary for the proper enforcement of this chapter.

(c) If any dealer or any other taxpayer fails for any period of time to keep records from which a proper determination of the tax due under this chapter may be made, the department may fix the amount of tax due for that period from the best information available, and assess the tax.

§ -5 Administration by department; rules. (a) In administering the provisions of this chapter, including the issuance of licenses, the imposition of taxes and computation, and the collection of taxes, the department shall have all powers and authority granted under chapter 231.

(b) The department may adopt rules pursuant to chapter 91 to implement this chapter. The department may also render interpretations, issue comfort letters, and perform other acts to assist in the full and effective administration of this chapter.

(c) The department shall deposit any taxes and penalties collected under this chapter to the credit of the child protective services foster child special fund, established in section 346- .

§ -6 Penalties. Any violation of the requirements of this chapter, including the failure to pay taxes in a timely manner, shall be subject to a civil fine of not more than $1,000 per violation."

SECTION 3. Chapter 346, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§346-       Child protective services foster child special fund. There is created a child protective services foster child special fund, into which shall be deposited:

(1) All taxes and penalties paid under chapter ;

(2) Any appropriations by the legislature to the fund; and

(3) Any interest on or proceeds from investment of the moneys in the fund.

The fund shall be administered by the department of human services and expended to supplement the care of children within the jurisdiction of the child protective services agency who are assigned to foster care protection."

SECTION 4. New statutory material is underscored.

SECTION 5. This Act shall take effect on January 1, 2006.

INTRODUCED BY:	_____________________________