THE SENATE	S.B. NO.	2105
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII

A BILL FOR AN ACT

relating to the deposit beverage container program.

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

SECTION 1. The legislature finds that Act 12, Session Laws of Hawaii 2022, codified at section 328G-121.5, Hawaii Revised Statutes, attempted to strengthen accountability for the deposit beverage container program by requiring the department of health to develop and implement procedures to verify the accuracy and completeness of data reported by distributors and redemption centers. The legislature finds, however, that the requirement under section 328G-121.5(c)(2), Hawaii Revised Statutes, that all deposit beverage distributors obtain independent audits biennially has caused, and would have continued to cause, financial hardship on some distributors had the governor not paused enforcement on September 10, 2025. Many mid-sized distributors have received preliminary quotes upwards of $25,000 to complete an audit because the auditing firms found the statutory language vague and the auditing requirement difficult to execute in a consistent, defensible manner. These unanticipated costs are unreasonable, particularly when applied uniformly without regard to risk, and will inevitably be transferred to consumers in the form of higher beverage prices. Distributors and retailers have also noted that the cost of conducting the required independent audits exceeds the amount they pay into the deposit beverage container program, resulting in a compliance mandate that costs more to administer than it generates in program contributions or accountability benefits.

The legislature further finds that the State already has among the highest food costs in the nation due to shipping expenses, labor costs and shortages, commercial rents, electricity rates, and other structural cost drivers. At the same time, approximately one in three households in the State struggle to afford food. Therefore, it is imperative that the State refrain from imposing unnecessary administrative requirements that increase the cost of food and beverages without delivering a commensurate public benefit.

The legislature also finds that the department of health is already given robust enforcement authority under other provisions of section 342G-121.5, Hawaii Revised Statues, including a risk-based audit selection process, data analytics, trend analysis, follow-up audits, and public reporting of violations. These tools directly address compliance concerns identified by the state auditor that led to the enactment of Act 12 in 2022, and allow the department to focus oversight where risk is greatest. The deposit beverage container deposit special fund already has ample resources to support strong oversight without shifting large audit costs onto the food supply chain. The state auditor's most recent financial and program audit reports that the deposit beverage container deposit special fund had a fund balance of $77,860,170 as of June 30, 2024. These funds can support as many risk-based audits through internal staff or external consultants as the department of health deems necessary, while avoiding a blanket, high-cost independent audit mandate that increases consumer prices.

The legislature additionally finds that no other state imposes a fixed, universal requirement that every distributor obtain an independent audit on a set biennial schedule regardless of risk; instead, other states rely on reporting, compliance oversight, and targeted enforcement mechanisms to maintain program integrity.

Accordingly, the purpose of this Act is to repeal unnecessary and disproportionate administrative burdens on deposit beverage distributors and redemption centers in the State, including the universal biennial independent audit requirement, while preserving the deposit beverage container program's existing risk-based accountability verification framework.

SECTION 2. Section 342G-121.5, Hawaii Revised Statutes, is amended to read as follows:

"[[]§342G-121.5[]] Risk-based selection process; audit. (a) The department shall develop a risk-based process to select[,] for periodic audit[,] certain deposit beverage distributor and redemption center reports submitted to the deposit beverage container program. The department may hire personnel or external consultants to perform the audits. In developing a risk-based process to audit certain deposit beverage distributor and redemption center reports, the department shall:

(1) Consider a variety of risk factors, including but not limited to the amount of money transacted, prior audit findings, and frequency of the deposit beverage distributor's or redemption center's prior audits;

(2) Require selected deposit beverage distributors and redemption centers to send monthly or semi-annual distribution reports and supporting records, such as schedules of invoices, shipping documents, point‑of‑sale reports, and other documentation as required by the department, to the deposit beverage container program; and

(3) Ensure that the audit process includes a risk assessment derived from deposit beverage distributor and redemption center data based on the reports submitted, including but not limited to carrying out analytics and trend analyses to target certain deposit beverage distributors and redemption centers having unusual fluctuations.

(b) The department shall:

(1) Summarize the results of the deposit beverage distributor and redemption center audits and assess whether enforcement actions should be considered to ensure that the amounts that are [being] reported are accurate;

(2) Consider conducting follow-up audits; and

(3) Consider publicly announcing violations.

[(c) All deposit beverage distributors shall:

(1) Develop and submit to the deposit beverage container program for approval an internal control process to ensure that the monthly or semi-annual distribution report forms contain accurate data and that adequate records are maintained; and

(2) Obtain independent audits for years ending in an odd number.]"

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:

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Report Title:

DOH; Deposit Beverage Container Program; Audit; Internal Control Process; Repeal; Distributors; Redemption Centers

Description:

Repeals provisions requiring all deposit beverage distributors to send monthly or semi-annual distribution reports and supporting records to the Department of Health; develop and submit to the program for approval, an internal control process to ensure accurate data reporting and adequate record maintenance; and obtain biennial independent audits.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.