July 29, 1998


RE:  Postponement of Effective Date of Imposition of Cigarette and Tobacco Taxes Under Chapter 245,
Hawaii Revised Statutes (HRS), on Sales and Gross Proceeds of Sales of
Cigarettes and Tobacco Products to the United States.
Pending further guidance from the Legislature, the Department of Taxation postpones the September 1, 1998 effective date for the imposition of the cigarette and tobacco taxes on sales and gross proceeds of sales of cigarettes and tobacco products to the United States as previously announced in Department of Taxation Announcement No. 98-13 (Announcement No. 98-13).

The 1998 Legislature did not reinstate the cigarette and tobacco taxes exemption for sales to the United States. As a result, the Department issued Announcement No. 98-13 which stated its intent to impose, beginning September 1, 1998, the cigarette and tobacco taxes on the sales, use, or possession of cigarettes and the sale of tobacco products by wholesalers and dealers to the United States.

However, the Department and members of the tobacco industry have continuing concerns regarding the Legislature's understanding of the need for reinstating the exemption and/or its impact on local distributors. Consequently, the Department will postpone the September 1, 1998 imposition of the cigarette and tobacco taxes on sales of these products to the United States.

The recently distributed revised Form M-19 (Rev. 1998) contains a notation on page 2 in the parenthetical after subheading (1) that reads: "NOTE: Effective September 1, 1998, sales to the United States, including any agency or instrumentality thereof are taxable." Because the Department will not be enforcing the cigarette and tobacco taxes on sales of these products to the United States beginning September 1, 1998, this notation is to be disregarded.

If you have any questions regarding this Announcement, please call Administrative Rules Specialist Dana Viola at 808- 587-1564. Forms and other tax information may be downloaded from the Department's website at http://www.state.hi.us/tax/tax.html. On Oahu, forms may be ordered by calling the Department's Forms Request Line at 808-587-7572. Persons who are not calling from Oahu may call 1-800-222-7575 to receive forms by mail or 808-678-0522 from a fax machine to receive forms by fax.

Director of Taxation