S.R. 164 Summary

• Requests the Department of Business, Economic Development, and Tourism, in consultation with the Department of Budget and Finance and Department of Taxation, to study the economic impact of exempting sales of goods and services to the federal government from Hawaii's state general excise tax.

• Hawaii currently applies a 4% general excise tax (plus 0.5% surcharge on Oahu) to businesses selling goods and services to the federal government, while only Washington and Vermont among U.S. states also tax such federal contracts.

• Out-of-state vendors selling to the federal government face no effective state tax enforcement, creating a competitive disadvantage for Hawaii-based businesses in federal contract bidding.

• Directs the study to analyze potential increases in economic activity, job creation, personal and corporate income, and tax revenues resulting from the proposed exemption.

• Requires the Department of Business, Economic Development, and Tourism to submit findings, recommendations, proposed legislation, and methodology to the Legislature by 20 days before the 2017 Regular Session convenes.