STAND. COM. REP. NO. 112-22

Honolulu, Hawaii

, 2022

RE: H.B. No. 1407

Honorable Scott K. Saiki

Speaker, House of Representatives

Thirty-First State Legislature

Regular Session of 2022

State of Hawaii

Sir:

Your Committee on Economic Development, to which was referred H.B. No. 1407 entitled:

"A BILL FOR AN ACT RELATING TO THE GENERAL EXCISE TAX,"

begs leave to report as follows:

The purpose of this measure is to:

(1) Clarify that sales to a licensed retail merchant, jobber, or other licensed seller for resale are only eligible for the wholesale tax rate if the resale is subject to the highest general excise rate; and

(2) Allow the resale of a service or tangible personal property that is subject to the highest general excise tax rate to be eligible for the wholesale tax rate under certain circumstances.

Your Committee received testimony in support of this measure from the Department of Taxation. Your Committee received testimony in opposition to this measure from the Chamber of Commerce Hawaii, Hawai‘i Pacific Health, The Queen's Health Systems, and Walgreen Co. Your Committee received comments on this measure from the Hawaii Health Systems Corporation Corporate Board of Directors, Tax Foundation of Hawaii, and Healthcare Association of Hawaii.

Your Committee finds that existing law provides certain wholesalers a lower general excise tax rate due to inadvertent elimination of language in the general excise tax law that occurred over the past couple decades. Your Committee believes that it was the original intent of the Legislature to require within a transaction chain a sale at the highest general excise tax rate in order for a taxpayer to be eligible for the wholesale general excise tax rate. This measure clarifies when the wholesale general excise tax rate is applicable for certain resale transactions.

As affirmed by the record of votes of the members of your Committee on Economic Development that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1407 and recommends that it pass Second Reading and be referred to your Committee on Consumer Protection & Commerce.

Respectfully submitted on behalf of the members of the Committee on Economic Development,

____________________________

SEAN QUINLAN, Chair