Bill Text: HI SB394 | 2019 | Regular Session | Amended
Bill Title: Relating To Taxation.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2019-06-12 - Act 096, 06/07/2019 (Gov. Msg. No. 1197). [SB394 Detail]
Download: Hawaii-2019-SB394-Amended.html
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THE SENATE |
S.B. NO. |
394 |
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THIRTIETH LEGISLATURE, 2019 |
S.D. 1 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO TAXATION.
BE IT
ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
PART I
SECTION 1. Section 235-29, Hawaii Revised Statutes, is amended to read as follows:
"§235-29 Apportionment of business income; percentage. [All] (a) For taxable years beginning before January 1,
2019, all business income shall be apportioned to this State by multiplying
the income by a fraction, the numerator of which is the property factor plus
the payroll factor plus the sales factor, and the denominator of which is three.
(b) For taxable years beginning after December 31, 2018, all business income shall be apportioned to this State by multiplying the income by the sales factor."
PART II
SECTION
2. The purpose of this part is to adopt
market-based sourcing for purposes of apportioning income under the Uniform
Division of Income for Tax Purposes Act (UDITPA), part II of chapter 235,
Hawaii Revised Statutes. UDITPA governs
the imposition of the Hawaii net income tax to taxpayers that carry on business
both within and without the state.
Historically, UDITPA has sourced intangibles and services to the place
where the income-producing activity is performed or where most of the costs of
performance are incurred.
As
intangible property and services have become a greater part of the economy,
states have transitioned to market-based sourcing for intangibles and
services. Market-based sourcing imposes
tax in the place where taxpayers' markets are located rather than only the
location of taxpayers' activities.
Today, more than half of all states have made the transition to
market-based sourcing. This Act will
amend UDITPA to transition to market-based sourcing for income from intangibles
and services. Specifically, this Act
will change the sourcing rules for the Hawaii sales factor for sales of
services or intangibles to market-based sourcing.
This
transition will ensure that Hawaii's income tax is keeping up with the changing
economy and will foster uniformity with states that have also transitioned to
market-based sourcing. This will reduce
inter-state complexity and simplify inter-state compliance.
In
addition, Hawaii's general excise tax utilizes a version of market-based
sourcing. Therefore, transitioning the
net income tax to market-based sourcing will increase consistency and
efficiency between the two taxes.
SECTION
3. Section 235-37, Hawaii Revised
Statutes, is amended to read as follows:
"§235-37 Apportionment; sales factor; nontangible
personalty. Sales, other than sales
of tangible personal property, are in this State [if]:
(1) [The income producing activity is performed
in this State; or] In the case of intangible property, to the extent the
intangible property is used in this State; or
(2) [The income-producing activity is performed
both in and outside this State and a greater proportion of the income-producing
activity is performed in this State than in any other state, based on costs of performance.]
In the case of a service, to the extent the service is used or consumed in
this State."
PART III
SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 5. This Act shall take effect on July 1, 2050, and shall apply to taxable years beginning after December 31, 2018.
Report Title:
Taxation; Business Income; Apportionment; Net Income Tax; Sales Factor; Market-based Sourcing
Description:
Replaces the current 3-factor formula for apportionment of business income with a single sales factor. Amends the rules for sourcing the sales factor for net income tax to impose market sourcing for sales of other than tangible personal property. Provides specific rules for intangibles and services. Effective 7/1/2050. (SD1)
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.
