SB1572

SECTION 1. The legislature finds that sports wagering is a commonplace activity and that tens of thousands of residents in the State participate in illegal online sports gambling on unregulated internet sites each year. However, many people making illegal wagers in the State do so unknowingly. Illegal offshore gambling website operators process bets from the State without any taxation, regulatory oversight, or consumer protection accountability. Moreover, tens of millions of dollars in revenues generated from online gambling are being realized by offshore operators serving Hawaii residents, but no benefits are provided to the State.

The legislature further finds that providing a legal, safe, and regulated framework for sports wagering would combat illegal gambling activities, protect consumers, promote responsible gambling practices and mitigate associated risks, and generate additional revenue for the State to allocate to public initiatives, including education, housing, and infrastructure.

Accordingly, the purpose of this Act is to:

(1) Legalize and regulate sports wagering in the State;

(2) Establish the Hawaii state sports wagering commission; and

(3) Establish the responsible gambling program.

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

"Chapter

regulation of sports wagering

§ -1 Definitions. As used in this chapter:

"Adjusted sports wagering receipts" means a sports wagering operator's gross receipts from sports wagering excluding free bets and promotional credits, less the total of all winnings paid to patrons, which includes the cash equivalent of any merchandise or thing of value awarded as a prize, and less excise tax payments remitted to the federal government.

"Collegiate sports" means an athletic or sporting event in which at least one participant is a team or contestant competing on behalf or under sponsorship of a public or private institution of higher education, regardless of where the institution is located.

"Commission" means the Hawaii state sports wagering commission established pursuant to section -2.

"Department" means the department of business, economic development, and tourism.

"License" means any license applied for or issued by the commission under this chapter, including but not limited to:

(1) A sports wagering operator license under section -6 to permit a sports wagering operator to operate sports wagering:

(A) Through an approved mobile application or other digital platform that involves, at least in part, the use of the Internet; or

(B) In-person at a designated sportsbook or retail sports betting location approved by the commission; and

(2) A sports wagering supplier license under section -7 to sell goods and services to be used in connection with sports wagering but not to directly accept wagers.

"National criminal history background check system" means the criminal history record system maintained by the Federal Bureau of Investigation based on fingerprint identification or any other method of positive identification.

"Non-sporting event" means any event that is not collegiate sports or a professional sports or athletic event.

"Professional sports or athletic event" means an event at which two or more contestants participate in a sports event or athletic event and one or more participants receive compensation and do not have collegiate eligibility.

"Qualified gaming entity" means an entity that offers sports wagering through computers, mobile applications, or digital platforms, in not less than three jurisdictions in the United States pursuant to a state regulatory structure, or a retail sports betting location licensed by the commission.

"Responsible gambling program" means a set of initiatives, policies, and practices implemented to prevent or mitigate gambling addiction.

"Sports wagering" means a wager on the outcome of a professional, collegiate, or other authorized sporting event or contest, including wagers made online or in-person. Sports wagering includes but is not limited to single-game bets, teaser bets, parlays, over-under, moneyline, pools, exchange wagering, in-game wagering, in-play bets, proposition bets, and straight bets.

"Sports wagering account" means a financial record established by a sports wagering operator for an individual patron in which the person may deposit and withdraw funds for sports wagering and other authorized purchase and to which the licensed sports wagering operator may credit winnings or other amounts due to that patron or authorized by that patron. A sports wagering account may be established electronically through an approved mobile application or digital platform or in-person at a retail sports betting location approved by the commission.

"Sports wagering operator" means any entity or operator authorized by the commission to conduct sports wagering activities in the State.

"Sports wagering supplier" means a person that provides critical services to a sports betting operator; provided that critical services shall be deemed to be geolocation and know your customer services.

"Wager" means any sum of money or thing of value risked on an uncertain occurrence.

§ -2 Hawaii state sports wagering commission; established; duties. (a) There is established within the department of business, economic development, and tourism, the Hawaii state sports wagering commission which shall consist of seven members who shall serve staggered four-year terms and be appointed as follows:

(1) Three members shall be appointed by the governor;

(2) Two members shall be appointed by the president of the senate; and

(3) Two members shall be appointed by the speaker of the house of representatives.

(b) The commission shall carry out the following duties:

(1) Develop and adopt rules applicable to sports wagering operators;

(2) Develop and establish an application process, including forms and the payment of fees, for a license under this chapter;

(3) Develop and adopt a list of prohibited events for which sports wagering operators shall not accept wagers, including but not limited to elections, televised competitions, and award shows; provided that the commission may add an event to the list of prohibited events or remove an event from the list of prohibited events;

(4) Monitor the compliance of sports wagering operators and sports wagering suppliers under this chapter;

(5) Enforce penalties, including the suspension or revocation of a license, for violations of this chapter or any rules that the commission may adopt;

(6) Establish and administer a responsible gambling program;

(7) Collect fees and fines from sports wagering activities; and

(8) Adopt rules pursuant to chapter 91 to carry out the purposes of this chapter.

§ -3 Authorizing of sports wagering; license required. (a) Notwithstanding any law to the contrary, the operation of sports wagering shall be lawful when conducted in accordance with this chapter and the rules adopted under this chapter. Sports wagering operators may conduct sports wagering activities:

(1) In-person at retail sports betting locations approved by the commission; and

(2) Online via qualified gaming entities;

provided that the commission may limit the number of licensed operators in the State to ensure manageable oversight.

(b) A person or entity shall not engage in any activities in the State that require a license under this chapter unless the necessary license has been obtained in accordance with this chapter and the rules adopted under this chapter.

§ -4 Application; criminal history background check. (a) An application for a license or for renewal of a license required under this chapter shall be submitted on an application form as prescribed by the commission pursuant to section -2. An application submitted to the commission shall include the following:

(1) The full name, current address, and contact information of the applicant;

(2) Disclosure of each person that has control of the applicant as described in subsection (b);

(3) Consent to permit the commission to conduct a criminal history record check in accordance with subsection (c) of the applicant and each person disclosed under subsection (b)(2) in accordance with procedures established by the commission;

(4) For the applicant and each person disclosed under subsection (b)(2), a record of previous license or application in the State or in any other jurisdiction;

(5) For a sports wagering operator applicant, proof that the sports wagering system has been tested and certified for use in another United States jurisdiction by an independent testing laboratory;

(6) Proof that the applicant possesses sufficient cash and other supplies to conduct sports wagering at all times;

(7) Measures to ensure the security, protection, and confidentiality of a bettor's data;

(8) Measures to prevent underage or illegal gambling; and

(9) Any other information that the commission may require by rule.

(b) The following persons shall be considered to have control of an applicant or a licensee:

(1) Each corporate holding company, parent company, or subsidiary company of a corporate applicant or licensee and each person who owns fifteen per cent or more of the corporate applicant or licensee and who has the ability to control the activities of the corporate applicant or licensee or elect a majority of the board of directors of that corporate applicant or licensee, except for a bank or other licensed lending institution that holds a mortgage or other lien acquired in the ordinary course of business;

(2) Each person associated with a noncorporate applicant or licensee that directly or indirectly holds a beneficial or proprietary interest in the noncorporate applicant's or licensee's business operation or that the department otherwise determines has the ability to control the noncorporate applicant or licensee; and

(3) Any executive, employee, or agent of an applicant or licensee who has ultimate decision-making authority over the conduct of the applicant's or licensee's sports wagering operations in the State.

(c) The commission shall request a criminal history record check in the form the commission requires and submit fingerprints for a national criminal records check against the national criminal history background check system. The fingerprints shall be furnished by all persons required to be named in the application and shall be accompanied by a signed authorization for the release of information by a law enforcement agency in the State and the Federal Bureau of Investigation; provided that an individual who has submitted to a criminal history record check in the State or any other state within the previous twelve months shall not be required to submit to another criminal history record check; provided further that the person shall submit the results of the previous criminal history record check and affirm that there has been no material change in the individual's criminal history since the time of the previous criminal history record check.

(d) A person licensed under this chapter shall give the commission written notice within thirty days of any material change to any information provided in the licensee's application for a license or renewal, including any change in the identity of persons considered to have control of the licensee under subsection (b).

(e) The commission shall keep all information, records, interviews, reports, statements, memoranda, or other data supplied to or used by the commission in the course of its review or investigation of an applicant for an operator license confidential. The commission shall also keep confidential any trade secret, proprietary information, confidential commercial information, or confidential financial information pertaining to any applicant or licensee.

§ -5 Denial of license; reprimand, suspension, and revocation. The commission may deny a license to any applicant, reprimand any licensee, or suspend or revoke a license if:

(1) The applicant or licensee has knowingly made a false statement of material fact to the commission;

(2) The applicant or licensee has intentionally not disclosed the existence or identity of other persons that have control of the applicant or licensee as required by section -4;

(3) The applicant or licensee has had a license revoked by any government authority responsible for regulation of gaming activities;

(4) The applicant has been convicted of a crime of moral turpitude, gambling-related offense, theft or fraud offense, or has otherwise demonstrated, either by a police record or other satisfactory evidence, a lack of respect for law and order;

(5) The applicant or licensee has not demonstrated to the satisfaction of the commission financial responsibility sufficient to adequately meet the requirements of the licensed business or proposed business; or

(6) An applicant has not met the requirements of this section or any other provision of this chapter.

§ -6 Sports wagering operator license; issuance; fees; term of license. (a) The commission shall issue a sports wagering operator license to an applicant that meets all the requirements of this section, section -4, and rules adopted under this chapter and that has not violated any portion of this chapter. The commission shall establish a process that ensures equal opportunity for sports wagering operators that submitted an application within thirty days of applications first being accepted by the commission to first commence offering, conducting, and operating sports wagering on the same day.

(b) Only a qualified gaming entity shall be eligible to apply for a sports wagering operator license.

(c) A sports wagering operator license granted by the commission under this section shall grant a licensee the lawful authority to conduct sports wagering online or in-person at a retail sports betting location pursuant to any rules adopted under this chapter.

(d) The fee for an initial sports wagering operator license shall be $250,000. The fee for renewal of a sports wagering operator license shall be $100,000. In addition to the license fee, the commission may charge a processing fee for an initial or renewed sports wagering operator license in an amount equal to the projected cost of processing the application and performing any background investigations. If the actual cost exceeds the projected cost, an additional fee may be charged to meet the actual cost; provided that if the projected cost exceeds the actual cost, the difference may be refunded to the applicant or licensee.

(e) A license granted or renewed under this section shall be valid for three years, unless sooner revoked by the commission pursuant to section -5.

§ -7 Sports wagering supplier license; issuance; fees; term of license. (a) The commission shall issue a sports wagering supplier license upon finding that the applicant meets all requirements of this section, section -4, and rules adopted under this chapter.

(b) An applicant for a sports wagering supplier license shall demonstrate that the equipment, systems, or services that the applicant plans to offer to a sports wagering operator conform to standards established by the commission by rule. The commission may accept approval by another jurisdiction that is specifically determined by the commission to have similar equipment standards as evidence that the applicant meets the standards established by the commission.

(c) A sports wagering supplier license granted by the commission pursuant to this section shall grant a licensee lawful authority to sell or lease sports wagering equipment, systems, or services to sports wagering operators in the State within the terms and conditions of the license and any rules adopted under this chapter.

(d) The fee for an initial or renewed sports wagering supplier license shall be $ . In addition to the license fee, the commission may charge a processing fee for an initial or renewed license in an amount equal to the projected cost of processing the application and performing any background investigations. If the actual cost exceeds the projected cost, an additional fee may be charged to meet the actual cost; provided that if the projected cost exceeds the actual cost, the difference may be refunded to the applicant or licensee.

(e) A license granted or renewed under this section shall be valid for three years unless sooner revoked by the commission under section ‑5.

§ -8 Sports wagering; house rules. (a) A sports wagering operator shall adopt comprehensive house rules for game play governing sports wagering transactions with its patrons. The rules shall specify the amounts to be paid on winning wagers, the circumstances under which the sports wagering operator will void a bet, treatment of errors, late bets and related contingencies, and the effect of schedule changes. The commission shall approve house rules before implementation by a sports wagering operator.

(b) The house rules, together with any other information the commission determines to be appropriate, shall be available in the sports wagering system.

§ -9 Sports wagering operator; duties. A sports wagering operator shall:

(1) Employ a monitoring system using software to identify irregularities in volume or odds swings that could signal suspicious activity that requires further investigation; provided that the suspicious activity shall be promptly reported to and investigated by the commission; provided further that system requirements and specifications shall be in accordance with industry standards;

(2) Promptly report to the commission any facts or circumstances related to the operation of a licensee that constitute a violation of state or federal law and immediately report any suspicious betting over a threshold set by the operator that has been approved by the commission;

(3) Conduct all sports wagering activities and functions in a manner that does not pose a threat to the public health, safety, or welfare of the residents of the State;

(4) Keep current in all payments and obligations to the commission;

(5) Prevent any person from tampering with or interfering with the operation of any sports wagering;

(6) Ensure that sports wagering only occurs:

(A) Using an online sportsbook approved by the commission that uses communications technology to accept wagers originating in the State or in a state or jurisdiction approved by the commission and consistent with federal law; or

(B) In-person at a retail sports betting location approved by the commission;

(7) Conspicuously display the minimum and maximum wagers permitted and shall comply with the same;

(8) Maintain sufficient cash and other supplies to conduct sports wagering at all times;

(9) Maintain daily records showing the gross sports wagering receipts and adjusted gross sports wagering receipts of the licensee; and

(10) Timely file with the commission any additional reports required by this chapter or by rule adopted under this chapter.

§ -10 Sports wagering agreements. The department shall be authorized to:

(1) Enter into sports wagering agreements with other states, territories, nations, jurisdictions, governments, or other entities to accept wagers from individuals located outside the State; provided that entering into the sports wagering agreement shall not violate state or federal law; and

(2) Take all necessary actions to ensure that any sports wagering agreement entered into pursuant to this section becomes effective.

§ -11 Acceptance of wagers; excluded persons. (a) A sports wagering operator shall accept wagers on collegiate sports or a professional sports or athletic event:

(1) By means of electronic devices using a mobile application or digital platform approved by the commission; or

(2) In-person at a retail sports betting location approved by the commission.

A person placing a wager shall be twenty-one years of age or older and be physically located in the State.

(b) A sports wagering operator shall allow patrons to fund a sports wagering account using:

(1) A credit or debit card;

(2) Bonuses or promotions;

(3) Electronic bank transfer;

(4) An online or mobile payment system that supports online money transfers; and

(5) Any other means approved by the commission.

(1) Through the patron's sports wagering account, using a mobile application or digital platform approved by the commission; or

(2) In-person at a retail sports betting location approved by the commission.

The branding for each mobile application, digital platform, or retail sports betting location shall be determined by the sports wagering operator.

(d) A sports wagering operator may accept layoff wagers placed by other sports wagering operators and may place layoff wagers with other sports wagering operators as long as a sports wagering operator that places a wager with another sports wagering operator informs the sports wagering operator accepting the wager that the wager is being placed by a sports wagering operator and discloses the wagering operator's identity.

(e) The commission or a sports wagering operator may ban a person from participating in the play or operation of sports wagering. A log of all excluded persons shall be kept by the commission and shared with each sports wagering operator. A person on the commission's exclusion list or a sports wagering operator's exclusion list shall not engage in sports wagering under this chapter.

(f) An employee of a sports wagering operator shall not place a wager on any wagering even through a mobile application or digital platform of that employee's employer.

(g) A sports wagering operator shall not accept wagers for:

(1) A high school or youth sports event; or

(2) A non-sporting event.

§ -12 Sports wagering revenues; tax. For the privilege of holding a license to operate sports wagering under this chapter, a tax of fifteen per cent of the licensee's adjusted gross sports wagering receipts shall be levied on the licensee. The accrual method of accounting shall be used for purposes of calculating the amount of tax owed by the licensee. The department of taxation shall adopt rules and develop any forms necessary to carry out enforcement of this section.

§ -13 Penalties. Any person or entity who violates the provisions of this chapter or any rules adopted by the commission shall be subject to:

(1) A fine of not more than $500,000;

(2) Imprisonment for up to three years; or

(3) Suspension or revocation of a license for repeated or egregious violations.

§ -14 Exemption from gambling. Sports wagering operated by a sports wagering operator that is licensed under this chapter shall be exempt from part III of chapter 712.

§ -15 Responsible gambling program; underage gambling prevention. (a) The commission shall establish and administer a responsible gambling program that shall:

(1) Raise public awareness of gambling addiction;

(2) Educate the public of gambling addiction;

(3) Integrate a voluntary self-exclusion program; and

(4) Provide a twenty-four hour support service, including a gambling addiction hotline.

(b) Each licensee under this chapter shall remit to the commission the equivalent of one per cent of its adjusted sports wagering receipts each year to fund the responsible gambling program established under this section.

§ -16 Best practices; report. (a) The commission shall adopt best practices observed in other states with successful sports wagering programs, including:

(1) Regulatory frameworks and oversight to ensure strict compliance, auditing, fair play, market fairness, and consumer trust and choice;

(2) A balanced approach that partners local businesses offering in-person registration and online sports wagering platforms to promote online accessibility and support local businesses;

(3) A consumer-friendly model that attracts operators and bettors alike, encouraging competition, industry growth, and innovation; and

(4) Tax collection and revenue allocation to fund public initiatives, including responsible gambling programs.

(b) The commission shall submit a report detailing key performance metrics, tax revenue impacts, and program improvements based on successful models, including any proposed legislation, to the legislature no later than twenty days prior to the convening of each regular session."

SECTION 3. Section 237-13, Hawaii Revised Statutes, is amended to read as follows:

"§237-13 Imposition of tax. 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~~] the 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 licensed sports wagering. Upon every entity or person engaged in sports wagering as a licensed operator in the State pursuant to chapter , there is hereby levied and shall be assessed and collected a tax equal to fifteen per cent of the adjusted sports wagering receipts; provided that, of the taxes collected each fiscal year:

(A) Fifty per cent shall be paid to fund public education programs;

(B) Twenty-five per cent shall be paid to fund affordable housing initiatives;

(D) Ten per cent shall be deposited into the general fund for administrative costs.

For the purposes of this paragraph, "adjusted sports wagering receipts" has the same meaning as defined in section -1.

[~~(9)~~] (10) 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 4. Section 712-1220, Hawaii Revised Statutes, is amended by amending the definitions of "contest of chance" and "gambling" to read as follows:

""Contest of chance" means any contest, game, gaming scheme, or gaming device in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein. "Contest of chance" does not include sports wagering pursuant to chapter ."

"Gambling"[~~. A person engages in gambling if he stakes or risks~~] means staking or risking something of value upon the outcome of a contest of chance or a future contingent event not under [~~his~~] a person's control or influence, upon an agreement or understanding that [he] the person or someone else will receive something of value in the event of a certain outcome. [~~Gambling~~] "Gambling" does not include [~~bona~~]:

(1) Bona fide business transactions valid under the law of contracts, including but not limited to contracts for the purchase or sale at a future date of securities or commodities[~~, and agreements~~];

(2) Agreements to compensate for loss caused by the happening of chance, including but not limited to contracts of indemnity or guaranty and life, health, or accident insurance[.]; and

(3) Sports wagering activities authorized pursuant to chapter ."

SECTION 5. Section 846-2.7, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Criminal history record checks may be conducted by:

(1) The department of health or its designee on operators of adult foster homes for individuals with developmental disabilities or developmental disabilities domiciliary homes and their employees, as provided by section 321-15.2;

(2) The department of health or its designee on prospective employees, persons seeking to serve as providers, or subcontractors in positions that place them in direct contact with clients when providing non-witnessed direct mental health or health care services as provided by section 321-171.5;

(3) The department of health or its designee on all applicants for licensure or certification for, operators for, prospective employees, adult volunteers, and all adults, except adults in care, at healthcare facilities as defined in section 321-15.2;

(4) The department of education on employees, prospective employees, and teacher trainees in any public school in positions that necessitate close proximity to children as provided by section 302A-601.5;

(5) The counties on employees and prospective employees who may be in positions that place them in close proximity to children in recreation or child care programs and services;

(6) The county liquor commissions on applicants for liquor licenses as provided by section 281-53.5;

(7) The county liquor commissions on employees and prospective employees involved in liquor administration, law enforcement, and liquor control investigations;

(8) The department of human services on operators and employees of child caring institutions, child placing organizations, and resource family homes as provided by section 346-17;

(9) The department of human services on prospective adoptive parents as established under section 346‑19.7;

(10) The department of human services or its designee on applicants to operate child care facilities, household members of the applicant, prospective employees of the applicant, and new employees and household members of the provider after registration or licensure as provided by section 346-154, and persons subject to section 346-152.5;

(11) The department of human services on persons exempt pursuant to section 346-152 to be eligible to provide child care and receive child care subsidies as provided by section 346-152.5;

(12) The department of health on operators and employees of home and community-based case management agencies and operators and other adults, except for adults in care, residing in community care foster family homes as provided by section 321-15.2;

(13) The department of human services on staff members of the Hawaii youth correctional facility as provided by section 352-5.5;

(14) The department of human services on employees, prospective employees, and volunteers of contracted providers and subcontractors in positions that place them in close proximity to youth when providing services on behalf of the office or the Hawaii youth correctional facility as provided by section 352D-4.3;

(15) The judiciary on employees and applicants at detention and shelter facilities as provided by section 571-34;

(16) The department of corrections and rehabilitation on employees and prospective employees, volunteers, contract service providers, and subcontract service providers who are directly involved with the treatment and care of, or directly involved in providing correctional programs and services to, persons committed to a correctional facility, or placed in close proximity to persons committed when providing services on behalf of the department or the correctional facility, as provided by section 353-1.5 and the department of law enforcement on employees and prospective employees whose duties involve or may involve the exercise of police powers including the power of arrest as provided by section 353C-5;

(17) The board of private detectives and guards on applicants for private detective or private guard licensure as provided by section 463-9;

(18) Private schools and designated organizations on employees and prospective employees who may be in positions that necessitate close proximity to children; provided that private schools and designated organizations receive only indications of the states from which the national criminal history record information was provided pursuant to section 302C-1;

(19) The public library system on employees and prospective employees whose positions place them in close proximity to children as provided by section 302A‑601.5;

(20) The State or any of its branches, political subdivisions, or agencies on applicants and employees holding a position that has the same type of contact with children, vulnerable adults, or persons committed to a correctional facility as other public employees who hold positions that are authorized by law to require criminal history record checks as a condition of employment as provided by section 78-2.7;

(21) The department of health on licensed adult day care center operators, employees, new employees, subcontracted service providers and their employees, and adult volunteers as provided by section 321-15.2;

(22) The department of human services on purchase of service contracted and subcontracted service providers and their employees and volunteers, as provided by sections 346-2.5 and 346-97;

(23) The department of human services on foster grandparent program, senior companion program, and respite companion program participants as provided by section 346-97;

(24) The department of human services on contracted and subcontracted service providers and their current and prospective employees that provide home and community‑based services under section 1915(c) of the Social Security Act, title 42 United States Code section 1396n(c), or under any other applicable section or sections of the Social Security Act for the purposes of providing home and community-based services, as provided by section 346-97;

(25) The department of commerce and consumer affairs on proposed directors and executive officers of a bank, savings bank, savings and loan association, trust company, and depository financial services loan company as provided by section 412:3-201;

(26) The department of commerce and consumer affairs on proposed directors and executive officers of a nondepository financial services loan company as provided by section 412:3-301;

(27) The department of commerce and consumer affairs on the original chartering applicants and proposed executive officers of a credit union as provided by section 412:10-103;

(28) The department of commerce and consumer affairs on:

(A) Each principal of every non-corporate applicant for a money transmitter license;

(B) Each person who upon approval of an application by a corporate applicant for a money transmitter license will be a principal of the licensee; and

(C) Each person who upon approval of an application requesting approval of a proposed change in control of licensee will be a principal of the licensee,

as provided by sections 489D-9 and 489D-15;

(29) The department of commerce and consumer affairs on applicants for licensure and persons licensed under title 24;

(30) The Hawaii health systems corporation on:

(A) Employees;

(B) Applicants seeking employment;

(D) Current or prospective volunteers, providers, or contractors,

in any of the corporation's health facilities as provided by section 323F-5.5;

(31) The department of commerce and consumer affairs on:

(A) An applicant for a mortgage loan originator license, or license renewal; and

(B) Each control person, executive officer, director, general partner, and managing member of an applicant for a mortgage loan originator company license or license renewal,

as provided by chapter 454F;

(32) The state public charter school commission or public charter schools on employees, teacher trainees, prospective employees, and prospective teacher trainees in any public charter school for any position that places them in close proximity to children, as provided in section 302D-33;

(33) The counties on prospective employees who work with children, vulnerable adults, or senior citizens in community-based programs;

(34) The counties on prospective employees for fire department positions that involve contact with children or vulnerable adults;

(35) The counties on prospective employees for emergency medical services positions that involve contact with children or vulnerable adults;

(36) The counties on prospective employees for emergency management positions and community volunteers whose responsibilities involve planning and executing homeland security measures including viewing, handling, and engaging in law enforcement or classified meetings and assisting vulnerable citizens during emergencies or crises;

(37) The State and counties on employees, prospective employees, volunteers, and contractors whose position responsibilities require unescorted access to secured areas and equipment related to a traffic management center;

(38) The State and counties on employees and prospective employees whose positions involve the handling or use of firearms for other than law enforcement purposes;

(39) The State and counties on current and prospective systems analysts and others involved in an agency's information technology operation whose position responsibilities provide them with access to proprietary, confidential, or sensitive information;

(40) The department of commerce and consumer affairs on:

(A) Applicants for real estate appraiser licensure or certification as provided by chapter 466K;

(B) Each person who owns more than ten per cent of an appraisal management company who is applying for registration as an appraisal management company, as provided by section 466M-7; and

(C) Each of the controlling persons of an applicant for registration as an appraisal management company, as provided by section 466M-7;

(41) The department of health or its designee on:

(A) Individual applicants or individuals acting on behalf of applying entities for hemp processor permits as provided under section 328G-2; and

(B) All license applicants, licensees, employees, contractors, and prospective employees of medical cannabis dispensaries, and individuals permitted to enter and remain in medical cannabis dispensary facilities as provided under sections 329D-15(a)(4) and 329D-16(a)(3);

(42) The department of commerce and consumer affairs on applicants for nurse licensure or license renewal, reactivation, or restoration as provided by sections 457-7, 457-8, 457-8.5, and 457-9;

(43) The county police departments on applicants for permits to acquire firearms pursuant to section 134-2, on individuals registering their firearms pursuant to section 134-3, and on applicants for new or renewed licenses to carry a pistol or revolver and ammunition pursuant to section 134-9;

(44) The department of commerce and consumer affairs on:

(A) Each of the controlling persons of the applicant for licensure as an escrow depository, and each of the officers, directors, and principals who will be in charge of the escrow depository's activities upon licensure; and

(B) Each of the controlling persons of an applicant for proposed change in control of an escrow depository licensee, and each of the officers, directors, and principals who will be in charge of the licensee's activities upon approval of the application,

as provided by chapter 449;

(45) The department of taxation on current or prospective employees or contractors who have access to federal tax information in order to comply with requirements of federal law, regulation, or procedure, as provided by section 231-1.6;

(46) The department of labor and industrial relations on current or prospective employees or contractors who have access to federal tax information in order to comply with requirements of federal law, regulation, or procedure, as provided by section 383-110;

(47) The department of human services on current or prospective employees or contractors who have access to federal tax information in order to comply with requirements of federal law, regulation, or procedure, and on current or prospective employees, volunteers, contractors, or contractors' employees or volunteers, subcontractors, or subcontractors' employees or volunteers, whose position places or would place them in close proximity to minors, young adults, or vulnerable adults, as provided by section 346-2.5;

(48) The child support enforcement agency on current or prospective employees, or contractors who have access to federal tax information in order to comply with federal law, regulation, or procedure, as provided by section 576D-11.5;

(49) The department of the attorney general on current or prospective employees or employees or agents of contractors who have access to federal tax information to comply with requirements of federal law, regulation, or procedure, as provided by section 28‑17;

(50) The department of commerce and consumer affairs on each control person, executive officer, director, general partner, and managing member of an installment loan licensee, or an applicant for an installment loan license, as provided in chapter 480J;

(51) The Hawaii state sports wagering commission on:

(A) Applicants for a sports wagering operator license as provided by section -4; and

(B) Each of the controlling persons of an applicant for a sports wagering operator license;

[~~(51)~~] (52) The university of Hawaii on current and prospective employees and contractors whose duties include ensuring the security of campus facilities and persons; and

[~~(52)~~] (53) Any other organization, entity, or the State, its branches, political subdivisions, or agencies as may be authorized by state law."

SECTION 6. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 8. This Act shall take effect on July 1, 2025; provided that the Hawaii state sports wagering commission shall adopt rules and regulations within six months of the effective date of this Act; provided further that a licensed sports wagering operator may begin offering sports wagering no sooner than twelve months from the effective date of this Act.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	1572
THIRTY-THIRD LEGISLATURE, 2025
STATE OF HAWAII