STAND. COM. REP. NO. 2844

Honolulu, Hawaii

RE: S.B. No. 2399

S.D. 2

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 2399, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO A GENERAL EXCISE TAX EXEMPTION FOR AIRCRAFT MAINTENANCE,"

begs leave to report as follows:

The purpose and intent of this measure is to amend the general excise tax law.

More specifically, this measure provides a general excise tax exemption for the sale of materials, parts, or tools that are used for aircraft service and maintenance or for the construction of an aircraft service and maintenance facility.

Your Committee received written comments in support of this measure from Alaska Airlines and Hawaiian Airlines, and from Chamber of Commerce Hawaii.

Your Committee received written comments on this measure from the Department of Taxation.

Your Committee finds that many states explicitly exempt aircraft parts from their sales tax if the parts are sold to a federally licensed air carrier. Your Committee also finds that Hawaii law provides a general excise tax exemption for aircraft servicing and maintenance. However, your Committee recognizes that the Hawaii Intermediate Court of Appeals recently held that the exemption language does not exempt from the general excise tax the sale of parts to an air carrier, even though the complementary use tax law explicitly exempts from the use tax imports of these parts from an out-of-state seller.

This measure addresses that gap in the exemption language.

Your Committee has amended this measure by changing the effective date to July 1, 2050, to facilitate further discussion on the measure.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2399, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 2399, S.D. 2.

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

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DONOVAN M. DELA CRUZ, Chair