Hawaii Tax Waiver Gets Second Look

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HONOLULU -- A bill introduced for the second consecutive year in the State House here would exempt Hawaii travel agencies from paying the state's 4% general excise tax on airline commissions.

A similar bill was introduced last year at the request of the Hawaii ASTA chapter, but it died after the House Finance Committee declined to vote on it.

The bill (H.B. 2009) would make travel agents the same under law as insurance and real estate agents.

For these businesses, double taxation regarding outside contractors was eliminated in the late 1970s.

Another bill being put forward this year (H.B. 2012) would eliminate the double taxing of travel agents' revenues when commissions are split with outside sales personnel.

Both agencies and their outside sales people now pay the 4% general excise tax on all revenues.

This means, for example, if an agent gets a $50 commission and gives $25 to an outside sales person, that $25 is taxed twice.

Under that bill, which is the first attempt by the ASTA chapter to end the double tax, an agent would pay the tax only on the commission kept, not on the amount given to the outside salesperson.

According to Danny Casey, the chapter's legislative affairs committee chairman, there is a precedent for eliminating such double taxation.

The chapter is waiting for the House Finance Committee to set hearing dates for both bills.

"We're in a wait-and-see mode," said Casey, who has chapter members ready to testify.

Although Casey believes the chapter has a good case for H.B. 2009, he is not so optimistic for the airline commission bill (H.B. 2012).

Hawaii is the only state with a significant tax on airline commissions.

The chapter introduced the same bill last year to counteract in a small way revenue losses resulting from commission caps.

It was the chapter's first move to get the airline commission tax eliminated since 1988.

ASTA was successful in getting legislation passed that year, only to see it vetoed by then Governor John Waihee.

Casey noted that legislators, like last year, face a state revenue shortfall.

However, he added, "There is a different attitude, a feeling at the state Legislature of a need to free up business to create jobs.

Hawaii, with one of the poorest-performing state economies in the U.S., has been losing jobs for some years, and the need for a more pro-small-business climate was a major issue in last November's elections.

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