STAND. COM. REP. NO. 2189

Honolulu, Hawaii

RE:    S.B. No. 2893

       S.D. 1

Honorable Donna Mercado Kim

President of the Senate

Twenty-Seventh State Legislature

Regular Session of 2014

State of Hawaii

Madam:

     Your Committee on Ways and Means, to which was referred S.B. No. 2893 entitled:

"A BILL FOR AN ACT RELATING TO TRUST FUND LIABILITY FOR AMOUNTS PASSED ON AS TAX,"

begs leave to report as follows:

     The purpose and intent of this measure is to create trust fund liability for taxes that are passed on as taxes owed by the taxpayer for a transaction.

     The Department of Taxation provided testimony in support of this measure.  The Tax Foundation of Hawaii provided comments on this measure.

     Your Committee finds that businesses are administratively allowed to pass on certain taxes to consumers.  However, businesses do not always remit the entirety of those amounts to the State, either in an attempt to avoid paying taxes or because they dispute their liability for the taxes owed.  This measure will therefore expedite the resolution of tax disputes in cases where the taxes are passed on to the consumer.

     Your Committee has amended this measure by:

(1)  Clarifying that the taxpayer's trust fund liability is reduced by amounts collected but returned to their sources; and

(2)  Making technical nonsubstantive amendments for the purposes of clarity and style.

     As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2893, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 2893, S.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

____________________________

DAVID Y. IGE, Chair