SB3232

SECTION 1. Chapter 201, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§201- New businesses; report; assistance. The department shall:

(1) Develop and post on its website an annual report detailing whether any laws or rules have been adopted or amended in the year prior to the report that support businesses operating for five years or less; and

(2) Serve as the primary point of contact to assist businesses operating for five years or less."

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

"§237- Imposition of tax on new businesses. A tax shall be assessed and collected annually against persons who have obtained a license pursuant to section 237-9 on or after July 1, 2022, as follows:

(1) The first $ of a person's income in the first tax year the person is engaging in business shall be exempt from the tax imposed under section 237-13;

(2) The first $ of a person's income in the second tax year the person is engaging in business shall be exempt from the tax imposed under section 237-13;

(3) The first $ of a person's income in the third tax year the person is engaging in business shall be taxed at a rate of per cent, and any remaining income shall be taxed pursuant to section 237-13;

(4) The first $ of a person's income in the fourth tax year the person is engaging in business shall be taxed at a rate of per cent, and any remaining income shall be taxed pursuant to section 237-13; and

(5) Any income of a person engaging in business after the fourth tax year shall be taxed pursuant to section 237-13."

SECTION 3. Chapter 383, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§383- Self-employment assistance; benefits. (a) An individual shall be eligible to continue to receive benefits as allowed under section 383-22 if the individual:

(1) Is eligible to receive benefits under this chapter;

(2) Is identified under section 383-92.5 as an individual likely to exhaust regular benefits;

(3) Has filed an application to continue to receive regular benefits within sixty days of filing an initial claim for regular benefits and furnished the department with any other information the director may prescribe;

(4) Has, at the time the application is filed, a balance of regular benefits equal to at least eighteen times the individual's weekly benefits amount and at least eighteen weeks remaining in the individual's benefit year; and

(5) Provides documentation that the individual is working on a full-time basis towards starting a business in the State, including but not limited to participating in training and activities, such as business counseling; provided that for the purposes of this paragraph, "full-time basis" means the amount of time necessary each week, as determined by the department, to establish a business that will serve as the full-time occupation of the individual.

An individual who fails meet the requirements of this subsection shall be disqualified for benefits for the week in which the failure occurs.

(b) An individual approved by the department to continue to receive regular benefits as provided under subsection (a) shall be exempt from the requirements of sections 383-29(a)(2), 383-29(a)(3), and 383-30(2).

(c) Except as otherwise provided in subsection (a), if an individual is ineligible for benefits under this chapter at any time while otherwise authorized to receive benefits pursuant to this section, the individual shall be disqualified from receiving benefits.

(d) The department shall adopt rules pursuant to chapter 91 to administer this section."

SECTION 4. Chapter 412, article IX, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§412:7- Small business loans; confessions of judgment; prohibited. (a) A savings and loan association shall not require a small business domiciled in the State to sign a confession of judgment as a condition for receiving a loan.

(b) For the purposes of this section, "small business" means a corporation, partnership, sole proprietorship, or other legal entity that:

(1) Is domiciled in this State;

(2) Is formed to make a profit;

(3) Is independently owned and operated; and

(4) Employs fewer than one hundred full-time employees."

SECTION 5. Section 39-53, Hawaii Revised Statutes, is amended to read as follows:

"§39-53 Additional powers of departments. In addition to the powers which departments may otherwise have, any department shall have the power pursuant to this part:

(1) To construct, acquire by gift, purchase, or the exercise of the right of eminent domain, reconstruct, improve, better, or extend any undertaking within its jurisdiction, and to acquire by gift, purchase, or the exercise of the right of eminent domain, lands or rights in land or water in connection therewith within its jurisdiction or to undertake the establishment and administration of a loan program as authorized by law within its jurisdiction; provided that a department shall allocate at least per cent of funds awarded under this chapter to a business established within five years of a project to be conducted pursuant to this paragraph;

(2) To operate and maintain any undertaking or administer, operate, and maintain a loan program as authorized by law within its jurisdiction and furnish the services, facilities, and commodities thereof for its own use and for the use of public and private consumers; provided that a department shall allocate at least per cent of funds awarded under this chapter to a business established within five years of a project to be conducted pursuant to this paragraph;

(3) To issue revenue bonds of the State in the amounts authorized by specific act or acts of the legislature to finance in whole or in part the cost of the acquisition, purchase, construction, reconstruction, improvement, betterment, or extension of any undertaking or the establishment and administration of any loan program as authorized by law;

(4) Subject to the provisions of section 39-61, to impose, prescribe, and collect rates, rentals, fees, and charges for the use and services of, and the facilities and commodities furnished by, the undertaking or for the use and services of the loan program as authorized by law; and

(5) To pledge to the punctual payment of the revenue bonds and interest thereon, or to covenant to pay into any special funds from which any of the revenue bonds may be payable, all or any portion of the revenue of the undertaking or loan program or of any part thereof, or the user taxes derived therefrom, or any combination of both (including improvements, betterments, or extensions thereto thereafter constructed or acquired) sufficient, among other things, to pay the revenue bonds and interest as they shall become due and to create and maintain reasonable reserves to pay the principal and interest; provided that no user taxes shall be pledged to the payment unless the legislature in the specific act or acts authorizing the issuance of the revenue bonds shall have provided that the revenue bonds may be payable from and secured by user taxes.

The department, in determining the cost, may include all costs and estimated costs of the issuance of the revenue bonds, all architectural, engineering, inspection, financial and legal expenses, all costs of establishing or administering a loan program authorized by law, the cost of causing the payment of the principal or interest or both of the revenue bonds to be insured or guaranteed, the initial cost of any support facility obtained as permitted by section 39-59, and interest which it is estimated will accrue during the construction period and for six months thereafter on money borrowed or which it is estimated will be borrowed pursuant to this part."

SECTION 6. Section 103D-206, Hawaii Revised Statutes, is amended to read as follows:

"§103D-206 Additional duties of the administrator of the procurement office. In addition to the duties referred to in section 103D-205, the administrator shall:

(1) Perform periodic review of the procurement practices and procedures of all governmental bodies, in collaboration with the state procurement policy board, for compliance with the procurement code;

(2) Assist, advise, and guide governmental bodies in matters relating to procurement[;], including advising government bodies to allocate at least per cent of funds for the procurement of goods or services from businesses established within the previous five years and whose principal place of business is in the State;

(3) Determine corrective actions; provided that if a procurement officer under the jurisdiction of the administrator of the state procurement office or a chief procurement officer of any of the other state entities under section 103D-203, fails to comply with any determination rendered by the administrator within thirty days from the date of the issuance of the determination, or longer if permitted by the administrator upon request by the procurement officer or a chief procurement officer, the procurement officer or chief procurement officer shall be subject to an administrative fine under section 103D-106, for every day of noncompliance;

(4) Develop and administer a statewide procurement orientation and training program;

(5) Develop, distribute, and maintain a procurement manual for all state procurement officials; and

(6) Develop, distribute, and maintain a procurement guide for vendors wishing to do business with the State and its counties."

SECTION 7. Section 237-9, Hawaii Revised Statutes, is amended to read as follows:

§237-9 Licenses; penalty. (a) Except as provided in this section, any person who has a gross income or gross proceeds of sales or value of products upon which a privilege tax is imposed by this chapter, as a condition precedent to engaging or continuing in such business, shall in writing apply for and obtain from the department of taxation[~~, upon a one-time payment of the sum of $20,~~] a license to engage in and to conduct such business, upon condition that the person shall pay the taxes accruing to the State under this chapter, and the person shall thereby be duly licensed to engage in and conduct the business. The license shall not be transferable and shall be valid only for the person in whose name it is issued and for the transaction of business at the place designated therein. The license may be inspected and examined, and shall at all times be conspicuously displayed at the place for which it is issued.

(b) Licenses and applications therefor shall be in such form as the department shall prescribe, except that where the licensee is engaged in two or more forms of business of different classification, the license shall so state on its face. The license provided for by this section shall be effective until canceled in writing. Any application for the reissuance of a previously canceled license identification number after December 31, 1989, shall be regarded as a new license application [~~and subject to the payment of the one-time license fee of $20~~]. The director may revoke or cancel any license issued under this chapter for cause as provided by rules adopted pursuant to chapter 91.

(c) Any person who receives gross income or gross proceeds of sales or value of products from engaging in business in the State and who fails to obtain a license or receives gross income or gross proceeds of sales or value of products from engaging in business in the State without a license required under this section may be fined not more than $500; provided that a cash-based business may be fined not less than $500 and not more than $2,000, as determined by the director or the director's designee. The penalty under this subsection shall be in addition to any other penalty provided under law and may be waived or canceled upon a showing of good cause.

(d) [~~If the license fee is paid, the~~] The department shall not refuse to issue a license or revoke or cancel a license for the exercise of a privilege protected by the First Amendment of the Constitution of the United States, or for the carrying on of interstate or foreign commerce, or for any privilege the exercise of which, under the Constitution and laws of the United States, cannot be restrained on account of nonpayment of taxes, nor shall section 237-46 be invoked to restrain the exercise of such a privilege, or the carrying on of such commerce.

(e) The director may permit a person engaged in network marketing, multi-level marketing, or other similar business to obtain the license required under this section for purposes of becoming a tax collection agent on behalf of its direct sellers. The tax collection agent shall report, collect, and pay over the taxes due under this chapter and chapter 238 on behalf of its direct sellers who are covered by the tax collection agreement. The tax collection agent's direct sellers shall be deemed to be licensed under this chapter; provided that the licensure shall apply solely to the business activity conducted directly through the marketing arrangement. Under this section, a tax collection agent shall:

(1) Notify all of its direct sellers making sales in the State that it has been designated to collect, report, and pay over the tax imposed by this chapter and chapter 238 on their behalf on the business activity conducted through the marketing arrangement;

(2) If required by the director as a condition of obtaining the license, furnish with the annual return, a list (including identification numbers) of all direct sellers for the taxable year who have been provided (by the tax collection agent) information returns required under section 6041A of the Internal Revenue Code of 1986, as amended, and any other information that is relevant to ensure proper payment of taxes due under this section; and

(3) Be personally liable for the taxes due and collected under the tax collection agreement if taxes are collected, but not reported or paid, together with penalties and interest as provided by law.

(f) Notwithstanding any other law to the contrary, beginning July 1, 2022, a person who obtains a license to engage in and conduct business pursuant to this section shall be exempt from paying any other fee relating to a license or registration within the first five years after the person obtains the license.

[~~(f)~~] (g) For the purposes of this section:

"Cash-based business" has the same meaning as in section 231-93.

"Consumer product" shall include tangible consumer products and intangible consumer services.

"Direct seller" means any person who is engaged in the trade or business of selling (or soliciting the sale of) consumer products:

(1) To any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis, that the director prescribes by rule adopted pursuant to chapter 91, for resale other than in a permanent retail establishment;

(2) Other than in a permanent retail establishment; provided that:

(A) Substantially all the remuneration (whether or not paid in cash) for the sale of consumer products is directly related to sales or other output rather than to the number of hours worked; and

(B) The sales of consumer products by the person are performed pursuant to a written contract that provides that the person will not be treated as an employee with respect to those sales for federal or state tax purposes.

"Direct seller" includes individuals who realize remuneration dependent on the productivity of other individuals in the marketing arrangement.

"Network marketing" or "multi-level marketing" means a marketing arrangement in which consumer products are distributed and sold to or through direct sellers."

SECTION 8. Section 237-12, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) The tax imposed by this chapter shall be in addition to [~~the license fee imposed under section 237-9 and~~] all other taxes levied by law as a condition precedent to engaging in any business, trade, or calling. A person exercising a privilege taxable under this chapter[~~, subject to the payment of the license fee imposed under section 237-9~~], which is a condition precedent to exercising the privilege taxed, may exercise the privilege upon the condition that the person shall pay the tax accruing under this chapter."

SECTION 9. Section 237-13, Hawaii Revised Statutes, is amended to read as follows:

"§237-13 Imposition of tax. [~~There~~] Except as provided under section 237- , there is hereby levied and shall be assessed and collected annually privilege taxes against persons on account of their business and other activities in the State measured by the application of rates against values of products, gross proceeds of sales, or gross income, whichever is specified, as follows:

(1) Tax on manufacturers.

(A) Upon every person engaging or continuing within the State in the business of manufacturing, including compounding, canning, preserving, packing, printing, publishing, milling, processing, refining, or preparing for sale, profit, or commercial use, either directly or through the activity of others, in whole or in part, any article or articles, substance or substances, commodity or commodities, the amount of the tax to be equal to the value of the articles, substances, or commodities, manufactured, compounded, canned, preserved, packed, printed, milled, processed, refined, or prepared for sale, as shown by the gross proceeds derived from the sale thereof by the manufacturer or person compounding, preparing, or printing them, multiplied by one-half of one per cent.

(B) The measure of the tax on manufacturers is the value of the entire product for sale.

(2) Tax on business of selling tangible personal property; producing.

(A) Upon every person engaging or continuing in the business of selling any tangible personal property whatsoever, there is likewise hereby levied, and shall be assessed and collected, a tax equivalent to four per cent of the gross proceeds of sales of the business; provided that, in the case of a wholesaler, the tax shall be equal to one-half of one per cent of the gross proceeds of sales of the business; and provided further that insofar as the sale of tangible personal property is a wholesale sale under section 237-4(a)(8), the tax shall be one-half of one per cent of the gross proceeds. Upon every person engaging or continuing within this State in the business of a producer, the tax shall be equal to one-half of one per cent of the gross proceeds of sales of the business, or the value of the products, for sale.

(B) Gross proceeds of sales of tangible property in interstate and foreign commerce shall constitute a part of the measure of the tax imposed on persons in the business of selling tangible personal property, to the extent, under the conditions, and in accordance with the provisions of the Constitution of the United States and the Acts of the Congress of the United States which may be now in force or may be hereafter adopted, and whenever there occurs in the State an activity to which, under the Constitution and Acts of Congress, there may be attributed gross proceeds of sales, the gross proceeds shall be so attributed.

(C) No manufacturer or producer, engaged in such business in the State and selling the manufacturer's or producer's products for delivery outside of the State (for example, consigned to a mainland purchaser via common carrier f.o.b. Honolulu), shall be required to pay the tax imposed in this chapter for the privilege of so selling the products, and the value or gross proceeds of sales of the products shall be included only in determining the measure of the tax imposed upon the manufacturer or producer.

(D) A manufacturer or producer, engaged in such business in the State, shall pay the tax imposed in this chapter for the privilege of selling its products in the State, and the value or gross proceeds of sales of the products, thus subjected to tax, may be deducted insofar as duplicated as to the same products by the measure of the tax upon the manufacturer or producer for the privilege of manufacturing or producing in the State; provided that no producer of agricultural products who sells the products to a purchaser who will process the products outside the State shall be required to pay the tax imposed in this chapter for the privilege of producing or selling those products.

(E) A taxpayer selling to a federal cost-plus contractor may make the election provided for by paragraph (3)(C), and in that case the tax shall be computed pursuant to the election, notwithstanding this paragraph or paragraph (1) to the contrary.

(F) The department, by rule, may require that a seller take from the purchaser of tangible personal property a certificate, in a form prescribed by the department, certifying that the sale is a sale at wholesale; provided that:

(i) Any purchaser who furnishes a certificate shall be obligated to pay to the seller, upon demand, the amount of the additional tax that is imposed upon the seller whenever the sale in fact is not at wholesale; and

(ii) The absence of a certificate in itself shall give rise to the presumption that the sale is not at wholesale unless the sales of the business are exclusively at wholesale.

(3) Tax upon contractors.

(A) Upon every person engaging or continuing within the State in the business of contracting, the tax shall be equal to four per cent of the gross income of the business.

(B) In computing the tax levied under this paragraph, there shall be deducted from the gross income of the taxpayer so much thereof as has been included in the measure of the tax levied under subparagraph (A), on another taxpayer who is a contractor, as defined in section 237-6; provided that any person claiming a deduction under this paragraph shall be required to show in the person's return the name and general excise number of the person paying the tax on the amount deducted by the person.

(C) In computing the tax levied under this paragraph against any federal cost-plus contractor, there shall be excluded from the gross income of the contractor so much thereof as fulfills the following requirements:

(i) The gross income exempted shall constitute reimbursement of costs incurred for materials, plant, or equipment purchased from a taxpayer licensed under this chapter, not exceeding the gross proceeds of sale of the taxpayer on account of the transaction; and

(ii) The taxpayer making the sale shall have certified to the department that the taxpayer is taxable with respect to the gross proceeds of the sale, and that the taxpayer elects to have the tax on gross income computed the same as upon a sale to the state government.

(D) A person who, as a business or as a part of a business in which the person is engaged, erects, constructs, or improves any building or structure, of any kind or description, or makes, constructs, or improves any road, street, sidewalk, sewer, or water system, or other improvements on land held by the person (whether held as a leasehold, fee simple, or otherwise), upon the sale or other disposition of the land or improvements, even if the work was not done pursuant to a contract, shall be liable to the same tax as if engaged in the business of contracting, unless the person shows that at the time the person was engaged in making the improvements the person intended, and for the period of at least one year after completion of the building, structure, or other improvements the person continued to intend to hold and not sell or otherwise dispose of the land or improvements. The tax in respect of the improvements shall be measured by the amount of the proceeds of the sale or other disposition that is attributable to the erection, construction, or improvement of such building or structure, or the making, constructing, or improving of the road, street, sidewalk, sewer, or water system, or other improvements. The measure of tax in respect of the improvements shall not exceed the amount which would have been taxable had the work been performed by another, subject as in other cases to the deductions allowed by subparagraph (B). Upon the election of the taxpayer, this paragraph may be applied notwithstanding that the improvements were not made by the taxpayer, or were not made as a business or as a part of a business, or were made with the intention of holding the same. However, this paragraph shall not apply in respect of any proceeds that constitute or are in the nature of rent, which shall be taxable under paragraph (9); provided that insofar as the business of renting or leasing real property under a lease is taxed under section 237-16.5, the tax shall be levied by section 237-16.5.

(4) Tax upon theaters, amusements, radio broadcasting stations, etc.

(A) Upon every person engaging or continuing within the State in the business of operating a theater, opera house, moving picture show, vaudeville, amusement park, dance hall, skating rink, radio broadcasting station, or any other place at which amusements are offered to the public, the tax shall be equal to four per cent of the gross income of the business, and in the case of a sale of an amusement at wholesale under section 237-4(a)(13), the tax shall be one-half of one per cent of the gross income.

(B) The department may require that the person rendering an amusement at wholesale take from the licensed seller a certificate, in a form prescribed by the department, certifying that the sale is a sale at wholesale; provided that:

(i) Any licensed seller who furnishes a certificate shall be obligated to pay to the person rendering the amusement, upon demand, the amount of additional tax that is imposed upon the seller whenever the sale is not at wholesale; and

(ii) The absence of a certificate in itself shall give rise to the presumption that the sale is not at wholesale unless the person rendering the sale is exclusively rendering the amusement at wholesale.

(5) Tax upon sales representatives, etc. Upon every person classified as a representative or purchasing agent under section 237-1, engaging or continuing within the State in the business of performing services for another, other than as an employee, there is likewise hereby levied and shall be assessed and collected a tax equal to four per cent of the commissions and other compensation attributable to the services so rendered by the person.

(6) Tax on service business.

(A) Upon every person engaging or continuing within the State in any service business or calling including professional services not otherwise specifically taxed under this chapter, there is likewise hereby levied and shall be assessed and collected a tax equal to four per cent of the gross income of the business, and in the case of a wholesaler under section 237-4(a)(10), the tax shall be equal to one-half of one per cent of the gross income of the business.

(B) The department may require that the person rendering a service at wholesale take from the licensed seller a certificate, in a form prescribed by the department, certifying that the sale is a sale at wholesale; provided that:

(i) Any licensed seller who furnishes a certificate shall be obligated to pay to the person rendering the service, upon demand, the amount of additional tax that is imposed upon the seller whenever the sale is not at wholesale; and

(ii) The absence of a certificate in itself shall give rise to the presumption that the sale is not at wholesale unless the person rendering the sale is exclusively rendering services at wholesale.

(C) Where any person is engaged in the business of selling interstate or foreign common carrier telecommunication services within and without the State, other than as a home service provider, the tax shall be imposed on that portion of gross income received by a person from service which is originated or terminated in this State and is charged to a telephone number, customer, or account in this State notwithstanding any other state law (except for the exemption under section 237-23(a)(1)) to the contrary. If, under the Constitution and laws of the United States, the entire gross income as determined under this paragraph of a business selling interstate or foreign common carrier telecommunication services cannot be included in the measure of the tax, the gross income shall be apportioned as provided in section 237-21; provided that the apportionment factor and formula shall be the same for all persons providing those services in the State.

(D) Where any person is engaged in the business of a home service provider, the tax shall be imposed on the gross income received or derived from providing interstate or foreign mobile telecommunications services to a customer with a place of primary use in this State when the services originate in one state and terminate in another state, territory, or foreign country; provided that all charges for mobile telecommunications services which are billed by or for the home service provider are deemed to be provided by the home service provider at the customer's place of primary use, regardless of where the mobile telecommunications originate, terminate, or pass through; provided further that the income from charges specifically derived from interstate or foreign mobile telecommunications services, as determined by books and records that are kept in the regular course of business by the home service provider in accordance with section 239-24, shall be apportioned under any apportionment factor or formula adopted under subparagraph (C). Gross income shall not include:

(i) Gross receipts from mobile telecommunications services provided to a customer with a place of primary use outside this State;

(ii) Gross receipts from mobile telecommunications services that are subject to the tax imposed by chapter 239;

(iii) Gross receipts from mobile telecommunications services taxed under section 237-13.8; and

(iv) Gross receipts of a home service provider acting as a serving carrier providing mobile telecommunications services to another home service provider's customer.

For the purposes of this paragraph, "charges for mobile telecommunications services", "customer", "home service provider", "mobile telecommunications services", "place of primary use", and "serving carrier" have the same meaning as in section 239-22.

(7) Tax on insurance producers. Upon every person engaged as a licensed producer pursuant to chapter 431, there is hereby levied and shall be assessed and collected a tax equal to 0.15 per cent of the commissions due to that activity.

(8) Tax on receipts of sugar benefit payments. Upon the amounts received from the United States government by any producer of sugar (or the producer's legal representative or heirs), as defined under and by virtue of the Sugar Act of 1948, as amended, or other Acts of the Congress of the United States relating thereto, there is hereby levied a tax of one-half of one per cent of the gross amount received; provided that the tax levied hereunder on any amount so received and actually disbursed to another by a producer in the form of a benefit payment shall be paid by the person or persons to whom the amount is actually disbursed, and the producer actually making a benefit payment to another shall be entitled to claim on the producer's return a deduction from the gross amount taxable hereunder in the sum of the amount so disbursed. The amounts taxed under this paragraph shall not be taxable under any other paragraph, subsection, or section of this chapter.

(9) Tax on other business. Upon every person engaging or continuing within the State in any business, trade, activity, occupation, or calling not included in the preceding paragraphs or any other provisions of this chapter, there is likewise hereby levied and shall be assessed and collected, a tax equal to four per cent of the gross income thereof. In addition, the rate prescribed by this paragraph shall apply to a business taxable under one or more of the preceding paragraphs or other provisions of this chapter, as to any gross income thereof not taxed thereunder as gross income or gross proceeds of sales or by taxing an equivalent value of products, unless specifically exempted."

SECTION 10. Section 237-23, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:

"(d) For all persons, the statement registering the person with the department or application for exemption shall be filed on or before March 31 of the first year of registration or within three months after the commencement of business. In the event of allowance of the exemption, no further statement or application therefor need be filed unless there is a material change in the facts. In the event of disallowance of the exemption, a license may be obtained [~~upon payment of the required fee~~] as provided by section 237-9[~~, less the $20 already paid under this section, which shall be credited thereon~~]. In the event the registrant has a license under this chapter, no further fee shall be required for registration under this section."

SECTION 11. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 12. This Act shall take effect on July 1, 2022.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	3232
THIRTY-FIRST LEGISLATURE, 2022
STATE OF HAWAII