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DEPARTMENT OF TAXATION ANNOUNCEMENT NO. 2002-20
October 11, 2002
RE: Act 176, Session Laws of Hawaii 2002 (Act 176), Relating to Solid Waste Management

Act 176 implements a "bottle bill." The stated purpose of Act 176 is to increase participation and recycling of deposit beverage containers, provide a connection between manufacturing decisions and recycling program management, and reduce litter. This Announcement discusses a general excise tax (GET) exclusion for certain amounts collected under Act 176.

Beginning October 1, 2002, every "deposit beverage distributor" 1 shall pay to the Department of Health or its designee, a deposit beverage container fee of 0.5 cents for each "deposit beverage container" 2 that is manufactured or imported into the State.

Beginning January 1, 2005, every deposit beverage distributor shall charge a "dealer" 3 and pay to the Department of Health or its designee, a deposit charge of 5 cents for each deposit beverage container sold in the State. Each dealer shall charge the consumer a deposit charge at the point of sale of the beverage, excluding sales for on-premise consumption. The deposit charge may appear as a separately stated line item on the invoice.

Act 176 excludes from the GET, amounts received as a deposit beverage container fee or deposit charge collected under chapter 342G, Part ___, Hawaii Revised Statutes.

The following examples illustrate the GET exclusion for the deposit beverage container fee:

Example 1. On October 1, 2002, a deposit beverage distributor (distributor) sells a case (24 bottles or cans) of soda for $4.00 to a dealer (supermarket) for retail sale. Distributor invoices the supermarket $4.14 for the case of soda computed as follows: $4.00 + 2 cents visible pass-on of the GET at the ½ % rate + a separately stated deposit beverage container fee of 12 cents (24 X 0.5 cents). Distributor may exclude the deposit beverage container fee of 12 cents from the GET and is subject to the GET at the ½ % wholesale rate on $4.02. Distributor must remit 12 cents to the Department of Health or its designee.

The supermarket sells the case of soda to a consumer for $5.32 ($5.00 case price + 20 cents visible pass-on of the GET + a separately stated deposit beverage container fee of 12 cents). The supermarket is subject to the GET at the 4% rate on $5.20.

Example 2. Assume the same facts as Example 1, except that the deposit beverage container fee is not separately stated on the invoice from the distributor to the supermarket or on the invoice from the supermarket to the consumer. 4 Although they did not separately state the deposit beverage container fee, the distributor and the supermarket may exclude the deposit beverage container fee from the GET if they maintain supporting documentation. 5

The Department of Health is drafting rules implementing Act 176.

Current forms and other tax information are available at the Department’s website at: www.hawaii.gov/tax. On Oahu, forms may be ordered by calling the Department’s Forms Request Line at: 587-7572. Persons who are not calling from Oahu, may call: 1-800-222-7572 (toll-free) to receive forms by mail or by fax.

/s/
MARIE Y. OKAMURA
Director of Taxation
HRS Section Explained: HRS Section 237-___
FOOTNOTES
1 "Deposit beverage distributor" means a person who is a manufacturer of beverages in deposit beverage containers in this State, or who imports and engages in the sale of filled deposit beverage containers to a dealer or consumer. The term includes federal agencies and military distributors, but does not include airlines and shipping companies that merely transport deposit beverage containers. See, Act 176, section 2, section 342G-A.
2 "Deposit beverage container" means the individual, separate, sealed glass, polyethylene terephthalte, high density polyethylene, or metal container less than or equal to sixty-four fluid ounces, used for containing, at the time of sale to the consumer, a deposit beverage intended for use or consumption in this State. See, Act 176, section 2, section 342G-A.
3 "Dealer" means a person who engages in the sale of beverages in deposit beverage containers to a consumer for off-premises consumption in the State. See, Act 176, section 2, section 342G-A.
4 The supermarket may only visibly pass-on to the consumer an amount less than or equal to the GET payable by the supermarket (20 cents).
5 Documentation may include purchase orders or contracts that indicate whether the fee was added to the sales price of the soda and monthly reports and cancelled checks as proof that the fees were paid by the distributor to the Department of Health or its designee.