May 4, 1999


RE:  Act 10, Session Laws of Hawaii 1999 (Act 10), Relating to the Cigarette Tax

Act 10 amends Hawaii Revised Statutes (HRS) section 245-3 to restore the cigarette and tobacco tax exemption for sales of cigarettes and tobacco products to the United States or any of its instrumentalities (e.g., military installations). Act 10 is retroactively effective to taxable periods beginning after June 30, 1993 (the date of the inadvertent repeal of this exemption). 1

As indicated in Department of Taxation Announcement 98-15, we sought further clarification from the Legislature this year regarding its intention to repeal the exemption for sales to military installations from the cigarette and tobacco taxes imposed under HRS chapter 245. Act 220, Session Laws of Hawaii 1993, had amended HRS section 237-25 2 to repeal the exemption.

Relying on the legislative history of the exemption, we believed that its repeal was wholly contingent upon the passage of federal legislation which would have required military installations to purchase cigarettes from local wholesalers, as is required for liquor. The federal legislation ultimately failed to become law, 3 but the exemption was never restored. The Department viewed this as an oversight of a technical drafting issue and continued to allow the exemption. Act 10 clarifies that there was no intention by the Legislature to repeal the exemption in 1993 without the "buy local" federal provision also becoming law.

Forms and other tax information may be downloaded from the Department's website at 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 to receive forms by mail or 808-678-0522 from a fax machine to receive forms by fax.

Director of Taxation

1 Act 10 was passed by the Legislature as H.B. No. 1207 and was signed into law by the Governor on April 6, 1999.

2 Though HRS section 237-25 is a provision of the general excise tax law (HRS chapter 237), it also exempted military sales from cigarette and tobacco taxes imposed under HRS chapter 245.

3 Act 331, Session Laws of Hawaii 1997, further amended HRS section 245-3 to remove references to the federal legislation as it was not forthcoming.