| 1 | 1 | | THE SENATE S.B. NO. 628 THIRTY-THIRD LEGISLATURE, 2025 STATE OF HAWAII A BILL FOR AN ACT RELATING TO TAXATION. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII: |
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| 3 | 3 | | THE SENATE S.B. NO. 628 |
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| 4 | 4 | | THIRTY-THIRD LEGISLATURE, 2025 |
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| 5 | 5 | | STATE OF HAWAII |
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| 7 | 7 | | THE SENATE |
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| 9 | 9 | | S.B. NO. |
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| 11 | 11 | | 628 |
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| 13 | 13 | | THIRTY-THIRD LEGISLATURE, 2025 |
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| 17 | 17 | | STATE OF HAWAII |
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| 31 | 31 | | A BILL FOR AN ACT |
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| 37 | 37 | | RELATING TO TAXATION. |
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| 43 | 43 | | BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII: |
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| 47 | 47 | | PART I SECTION 1. 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] five 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] five 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] five 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] five 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] five 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] five 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 2. Section 237-15, Hawaii Revised Statutes, is amended to read as follows: "§237-15 Technicians. When technicians supply dentists or physicians with dentures, orthodontic devices, braces, and similar items which have been prepared by the technician in accordance with specifications furnished by the dentist or physician, and such items are to be used by the dentist or physician in the dentist's or physician's professional practice for a particular patient who is to pay the dentist or physician for the same as a part of the dentist's or physician's professional services, the technician shall be taxed as though the technician were a manufacturer selling a product to a licensed retailer, rather than at the rate of [four] five per cent which is generally applied to professions and services." SECTION 3. Section 237-16.5, Hawaii Revised Statutes, is amended as follows: 1. By amending subsection (a) to read: "(a) This section relates to the leasing of real property by a lessor to a lessee. There is hereby levied, and shall be assessed and collected annually, a privilege tax against persons engaging or continuing within the State in the business of leasing real property to another, equal to [four] five per cent of the gross proceeds or gross income received or derived from the leasing; provided that where real property is subleased by a lessee to a sublessee, the lessee, as provided in this section, shall be allowed a deduction from the amount of gross proceeds or gross income received from its sublease of the real property. The deduction shall be in the amount allowed under this section. All deductions under this section and the name and general excise tax number of the lessee's lessor shall be reported on the general excise tax return. Any deduction allowed under this section shall only be allowed with respect to leases and subleases in writing and relating to the same real property." 2. By amending subsection (f) to read: "(f) This section shall not cause the tax upon a lessor, with respect to any item of the lessor's gross proceeds or gross income, to exceed [four] five per cent." SECTION 4. Section 237-18, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows: "(f) Where tourism related services are furnished through arrangements made by a travel agency or tour packager and the gross income is divided between the provider of the services and the travel agency or tour packager, the tax imposed by this chapter shall apply to each such person with respect to such person's respective portion of the proceeds, and no more. As used in this subsection "tourism related services" means catamaran cruises, canoe rides, dinner cruises, lei greetings, transportation included in a tour package, sightseeing tours not subject to chapter 239, admissions to luaus, dinner shows, extravaganzas, cultural and educational facilities, and other services rendered directly to the customer or tourist, but only if the providers of the services other than air transportation are subject to a [four] five per cent tax under this chapter or chapter 239." SECTION 5. Section 237-31, Hawaii Revised Statutes, is amended to read as follows: "§237-31 Remittances. (a) All remittances of taxes imposed by this chapter shall be made by money, bank draft, check, cashier's check, money order, or certificate of deposit to the office of the department of taxation to which the return was transmitted. (b) The department shall issue its receipts therefor to the taxpayer and shall pay the moneys into the state treasury as a state realization, to be kept and accounted for as provided by law; provided that: (1) A sum, not to exceed $5,000,000, from all general excise tax revenues realized by the State shall be deposited in the state treasury in each fiscal year to the credit of the compound interest bond reserve fund; (2) A sum from all general excise tax revenues realized by the State that is equal to one-half of the total amount of funds appropriated or transferred out of the hurricane reserve trust fund under sections 4 and 5 of Act 62, Session Laws of Hawaii 2011, shall be deposited into the hurricane reserve trust fund in fiscal year 2013-2014 and in fiscal year 2014-2015; provided that the deposit required in each fiscal year shall be made by October 1 of that fiscal year; and (3) Commencing with fiscal year 2018-2019, a sum from all general excise tax revenues realized by the State that represents the difference between the state public employer's annual required contribution for the separate trust fund established under section 87A-42 and the amount of the state public employer's contributions into that trust fund shall be deposited to the credit of the State's annual required contribution into that trust fund in each fiscal year, as provided in section 87A-42. (c) Notwithstanding subsection (b), beginning on July 1, 2025, the additional revenues generated and collected from the increase in general excise tax rates imposed by sections 1, 2, 3, and 4 of Act , Session Laws of Hawaii 2025, shall be distributed as follows: (1) Fifty per cent of the revenues shall be deposited into the teacher salary special fund established under section 302A- ; and (2) Fifty per cent of the revenues shall be deposited into the school facilities special fund established under section 302A-1706." PART II SECTION 6. Chapter 302A, Hawaii Revised Statutes, is amended by adding a new section to part III, subpart B, to be appropriately designated and to read as follows: "§302A- Teacher salary special fund. (a) The teacher salary special fund, hereafter called the "fund", is hereby established. The fund shall be administered and managed by the department. Moneys in the fund shall be expended for teacher salaries and compensation authorized by this part. (b) The appropriate portion of the revenues from the general excise tax, as provided by section 237-31, shall be deposited in or credited to the fund each fiscal year. (c) Moneys from any other private or public source may be deposited in or credited to the fund; provided that mandates, regulations, or conditions on these funds do not conflict with the use of the fund under this chapter. Moneys received as a deposit or private contribution shall be deposited, used, and accounted for in accordance with the conditions established by the agency or person making the contribution." SECTION 7. Section 302A-1706, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows: "(a) There is established within the state treasury a special fund to be known as the school facilities special fund into which shall be deposited: (1) All moneys the authority receives, including funds appropriated or transferred by the legislature for deposit into the special fund; (2) A portion of the revenues from the general excise tax, as provided by section 237-31; [(2)] (3) Funds collected pursuant to section 302A-1608(a); provided that these moneys shall be deposited into the appropriate subaccount established pursuant to subsection (b); [(3)] (4) Any moneys received by the department in the form of a grant, gift, endowment, or donation for the development, planning, or construction of new school facilities or major renovations of school facilities; and [(4)] (5) All other moneys received by the authority and not deposited into a trust fund or trust account, including unrestricted grants, gifts, and donations; proceeds from sales of property; rents and other receipts from leases, rights of entry, and the like; and interest, refunds, and other receipts and payments." PART III SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored. SECTION 9. This Act shall take effect on July 1, 2025. INTRODUCED BY: _____________________________ |
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| 49 | 49 | | PART I |
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| 51 | 51 | | SECTION 1. Section 237-13, Hawaii Revised Statutes, is amended to read as follows: |
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| 52 | 52 | | |
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| 53 | 53 | | "§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: |
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| 55 | 55 | | (1) Tax on manufacturers. |
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| 56 | 56 | | |
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| 57 | 57 | | (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. |
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| 59 | 59 | | (B) The measure of the tax on manufacturers is the value of the entire product for sale. |
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| 60 | 60 | | |
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| 61 | 61 | | (2) Tax on business of selling tangible personal property; producing. |
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| 62 | 62 | | |
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| 63 | 63 | | (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] five 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. |
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| 64 | 64 | | |
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| 65 | 65 | | (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. |
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| 66 | 66 | | |
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| 67 | 67 | | (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. |
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| 68 | 68 | | |
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| 69 | 69 | | (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. |
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| 70 | 70 | | |
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| 71 | 71 | | (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. |
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| 72 | 72 | | |
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| 73 | 73 | | (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: |
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| 74 | 74 | | |
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| 75 | 75 | | (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 |
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| 76 | 76 | | |
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| 77 | 77 | | (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. |
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| 78 | 78 | | |
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| 79 | 79 | | (3) Tax upon contractors. |
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| 80 | 80 | | |
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| 81 | 81 | | (A) Upon every person engaging or continuing within the State in the business of contracting, the tax shall be equal to [four] five per cent of the gross income of the business. |
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| 82 | 82 | | |
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| 83 | 83 | | (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. |
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| 84 | 84 | | |
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| 85 | 85 | | (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: |
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| 86 | 86 | | |
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| 87 | 87 | | (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 |
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| 88 | 88 | | |
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| 89 | 89 | | (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. |
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| 90 | 90 | | |
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| 91 | 91 | | (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. |
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| 92 | 92 | | |
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| 93 | 93 | | (4) Tax upon theaters, amusements, radio broadcasting stations, etc. |
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| 94 | 94 | | |
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| 95 | 95 | | (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] five 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. |
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| 96 | 96 | | |
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| 97 | 97 | | (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: |
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| 98 | 98 | | |
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| 99 | 99 | | (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 |
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| 100 | 100 | | |
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| 101 | 101 | | (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. |
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| 102 | 102 | | |
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| 103 | 103 | | (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] five per cent of the commissions and other compensation attributable to the services so rendered by the person. |
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| 104 | 104 | | |
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| 105 | 105 | | (6) Tax on service business. |
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| 106 | 106 | | |
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| 107 | 107 | | (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] five 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. |
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| 108 | 108 | | |
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| 109 | 109 | | (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: |
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| 110 | 110 | | |
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| 111 | 111 | | (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 |
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| 112 | 112 | | |
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| 113 | 113 | | (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. |
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| 114 | 114 | | |
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| 115 | 115 | | (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. |
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| 116 | 116 | | |
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| 117 | 117 | | (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: |
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| 118 | 118 | | |
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| 119 | 119 | | (i) Gross receipts from mobile telecommunications services provided to a customer with a place of primary use outside this State; |
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| 120 | 120 | | |
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| 121 | 121 | | (ii) Gross receipts from mobile telecommunications services that are subject to the tax imposed by chapter 239; |
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| 122 | 122 | | |
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| 123 | 123 | | (iii) Gross receipts from mobile telecommunications services taxed under section 237-13.8; and |
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| 124 | 124 | | |
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| 125 | 125 | | (iv) Gross receipts of a home service provider acting as a serving carrier providing mobile telecommunications services to another home service provider's customer. |
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| 126 | 126 | | |
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| 127 | 127 | | 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. |
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| 128 | 128 | | |
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| 129 | 129 | | (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. |
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| 130 | 130 | | |
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| 131 | 131 | | (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. |
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| 132 | 132 | | |
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| 133 | 133 | | (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] five 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." |
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| 134 | 134 | | |
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| 135 | 135 | | SECTION 2. Section 237-15, Hawaii Revised Statutes, is amended to read as follows: |
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| 136 | 136 | | |
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| 137 | 137 | | "§237-15 Technicians. When technicians supply dentists or physicians with dentures, orthodontic devices, braces, and similar items which have been prepared by the technician in accordance with specifications furnished by the dentist or physician, and such items are to be used by the dentist or physician in the dentist's or physician's professional practice for a particular patient who is to pay the dentist or physician for the same as a part of the dentist's or physician's professional services, the technician shall be taxed as though the technician were a manufacturer selling a product to a licensed retailer, rather than at the rate of [four] five per cent which is generally applied to professions and services." |
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| 138 | 138 | | |
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| 139 | 139 | | SECTION 3. Section 237-16.5, Hawaii Revised Statutes, is amended as follows: |
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| 140 | 140 | | |
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| 141 | 141 | | 1. By amending subsection (a) to read: |
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| 142 | 142 | | |
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| 143 | 143 | | "(a) This section relates to the leasing of real property by a lessor to a lessee. There is hereby levied, and shall be assessed and collected annually, a privilege tax against persons engaging or continuing within the State in the business of leasing real property to another, equal to [four] five per cent of the gross proceeds or gross income received or derived from the leasing; provided that where real property is subleased by a lessee to a sublessee, the lessee, as provided in this section, shall be allowed a deduction from the amount of gross proceeds or gross income received from its sublease of the real property. The deduction shall be in the amount allowed under this section. |
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| 144 | 144 | | |
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| 145 | 145 | | All deductions under this section and the name and general excise tax number of the lessee's lessor shall be reported on the general excise tax return. Any deduction allowed under this section shall only be allowed with respect to leases and subleases in writing and relating to the same real property." |
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| 146 | 146 | | |
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| 147 | 147 | | 2. By amending subsection (f) to read: |
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| 148 | 148 | | |
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| 149 | 149 | | "(f) This section shall not cause the tax upon a lessor, with respect to any item of the lessor's gross proceeds or gross income, to exceed [four] five per cent." |
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| 150 | 150 | | |
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| 151 | 151 | | SECTION 4. Section 237-18, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows: |
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| 152 | 152 | | |
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| 153 | 153 | | "(f) Where tourism related services are furnished through arrangements made by a travel agency or tour packager and the gross income is divided between the provider of the services and the travel agency or tour packager, the tax imposed by this chapter shall apply to each such person with respect to such person's respective portion of the proceeds, and no more. |
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| 154 | 154 | | |
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| 155 | 155 | | As used in this subsection "tourism related services" means catamaran cruises, canoe rides, dinner cruises, lei greetings, transportation included in a tour package, sightseeing tours not subject to chapter 239, admissions to luaus, dinner shows, extravaganzas, cultural and educational facilities, and other services rendered directly to the customer or tourist, but only if the providers of the services other than air transportation are subject to a [four] five per cent tax under this chapter or chapter 239." |
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| 156 | 156 | | |
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| 157 | 157 | | SECTION 5. Section 237-31, Hawaii Revised Statutes, is amended to read as follows: |
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| 158 | 158 | | |
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| 159 | 159 | | "§237-31 Remittances. (a) All remittances of taxes imposed by this chapter shall be made by money, bank draft, check, cashier's check, money order, or certificate of deposit to the office of the department of taxation to which the return was transmitted. |
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| 160 | 160 | | |
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| 161 | 161 | | (b) The department shall issue its receipts therefor to the taxpayer and shall pay the moneys into the state treasury as a state realization, to be kept and accounted for as provided by law; provided that: |
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| 162 | 162 | | |
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| 163 | 163 | | (1) A sum, not to exceed $5,000,000, from all general excise tax revenues realized by the State shall be deposited in the state treasury in each fiscal year to the credit of the compound interest bond reserve fund; |
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| 164 | 164 | | |
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| 165 | 165 | | (2) A sum from all general excise tax revenues realized by the State that is equal to one-half of the total amount of funds appropriated or transferred out of the hurricane reserve trust fund under sections 4 and 5 of Act 62, Session Laws of Hawaii 2011, shall be deposited into the hurricane reserve trust fund in fiscal year 2013-2014 and in fiscal year 2014-2015; provided that the deposit required in each fiscal year shall be made by October 1 of that fiscal year; and |
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| 166 | 166 | | |
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| 167 | 167 | | (3) Commencing with fiscal year 2018-2019, a sum from all general excise tax revenues realized by the State that represents the difference between the state public employer's annual required contribution for the separate trust fund established under section 87A-42 and the amount of the state public employer's contributions into that trust fund shall be deposited to the credit of the State's annual required contribution into that trust fund in each fiscal year, as provided in section 87A-42. |
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| 168 | 168 | | |
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| 169 | 169 | | (c) Notwithstanding subsection (b), beginning on July 1, 2025, the additional revenues generated and collected from the increase in general excise tax rates imposed by sections 1, 2, 3, and 4 of Act , Session Laws of Hawaii 2025, shall be distributed as follows: |
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| 170 | 170 | | |
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| 171 | 171 | | (1) Fifty per cent of the revenues shall be deposited into the teacher salary special fund established under section 302A- ; and |
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| 172 | 172 | | |
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| 173 | 173 | | (2) Fifty per cent of the revenues shall be deposited into the school facilities special fund established under section 302A-1706." |
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| 174 | 174 | | |
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| 175 | 175 | | PART II |
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| 176 | 176 | | |
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| 177 | 177 | | SECTION 6. Chapter 302A, Hawaii Revised Statutes, is amended by adding a new section to part III, subpart B, to be appropriately designated and to read as follows: |
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| 178 | 178 | | |
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| 179 | 179 | | "§302A- Teacher salary special fund. (a) The teacher salary special fund, hereafter called the "fund", is hereby established. The fund shall be administered and managed by the department. Moneys in the fund shall be expended for teacher salaries and compensation authorized by this part. |
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| 180 | 180 | | |
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| 181 | 181 | | (b) The appropriate portion of the revenues from the general excise tax, as provided by section 237-31, shall be deposited in or credited to the fund each fiscal year. |
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| 182 | 182 | | |
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| 183 | 183 | | (c) Moneys from any other private or public source may be deposited in or credited to the fund; provided that mandates, regulations, or conditions on these funds do not conflict with the use of the fund under this chapter. Moneys received as a deposit or private contribution shall be deposited, used, and accounted for in accordance with the conditions established by the agency or person making the contribution." |
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| 184 | 184 | | |
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| 185 | 185 | | SECTION 7. Section 302A-1706, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows: |
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| 186 | 186 | | |
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| 187 | 187 | | "(a) There is established within the state treasury a special fund to be known as the school facilities special fund into which shall be deposited: |
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| 188 | 188 | | |
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| 189 | 189 | | (1) All moneys the authority receives, including funds appropriated or transferred by the legislature for deposit into the special fund; |
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| 190 | 190 | | |
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| 191 | 191 | | (2) A portion of the revenues from the general excise tax, as provided by section 237-31; |
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| 192 | 192 | | |
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| 193 | 193 | | [(2)] (3) Funds collected pursuant to section 302A-1608(a); provided that these moneys shall be deposited into the appropriate subaccount established pursuant to subsection (b); |
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| 194 | 194 | | |
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| 195 | 195 | | [(3)] (4) Any moneys received by the department in the form of a grant, gift, endowment, or donation for the development, planning, or construction of new school facilities or major renovations of school facilities; and |
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| 196 | 196 | | |
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| 197 | 197 | | [(4)] (5) All other moneys received by the authority and not deposited into a trust fund or trust account, including unrestricted grants, gifts, and donations; proceeds from sales of property; rents and other receipts from leases, rights of entry, and the like; and interest, refunds, and other receipts and payments." |
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| 198 | 198 | | |
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| 199 | 199 | | PART III |
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| 200 | 200 | | |
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| 201 | 201 | | SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored. |
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| 202 | 202 | | |
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| 203 | 203 | | SECTION 9. This Act shall take effect on July 1, 2025. |
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| 204 | 204 | | |
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| 205 | 205 | | |
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| 206 | 206 | | |
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| 207 | 207 | | INTRODUCED BY: _____________________________ |
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| 208 | 208 | | |
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| 209 | 209 | | INTRODUCED BY: |
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| 210 | 210 | | |
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| 211 | 211 | | _____________________________ |
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| 212 | 212 | | |
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| 213 | 213 | | |
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| 214 | 214 | | |
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| 215 | 215 | | |
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| 216 | 216 | | |
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| 217 | 217 | | Report Title: General Excise Tax; DOE; Teacher Salaries; Teacher Salary Special Fund; School Facilities Special Fund Description: Increases the general excise tax by 1%. Establishes the teacher salary special fund within the Department of Education. Requires that increased general excise tax revenues be deposited into the teacher salary special fund and the school facilities special fund. The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent. |
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| 218 | 218 | | |
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| 219 | 219 | | |
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| 220 | 220 | | |
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| 221 | 221 | | |
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| 222 | 222 | | |
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| 223 | 223 | | |
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| 224 | 224 | | |
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| 225 | 225 | | Report Title: |
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| 226 | 226 | | |
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| 227 | 227 | | General Excise Tax; DOE; Teacher Salaries; Teacher Salary Special Fund; School Facilities Special Fund |
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| 228 | 228 | | |
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| 229 | 229 | | |
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| 230 | 230 | | |
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| 231 | 231 | | Description: |
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| 232 | 232 | | |
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| 233 | 233 | | Increases the general excise tax by 1%. Establishes the teacher salary special fund within the Department of Education. Requires that increased general excise tax revenues be deposited into the teacher salary special fund and the school facilities special fund. |
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| 234 | 234 | | |
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| 235 | 235 | | |
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| 236 | 236 | | |
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| 237 | 237 | | |
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| 238 | 238 | | |
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| 239 | 239 | | |
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| 240 | 240 | | |
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| 241 | 241 | | The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent. |
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