July 21, 1999

DEPARTMENT OF TAXATION ANNOUNCEMENT NO. 99-19


RE: Act 173, Session Laws of Hawaii 1999 (Act 173), Relating to the General Excise Tax

Act 173 reduces the effect of the "pyramiding" of the general excise tax (GET) by clarifying that (1) sales to persons licensed under the GET law of single-serving packets of condiments furnished to customers are subject to the .5% wholesale rate; (2) sales of tangible personal property to persons licensed under the GET law who incorporate or process the property into a finished product and resell the property at retail (including, disposable containers, packages or wrappers to hold food) are subject to the .5% wholesale rate; and (3) the .5% intermediary services rate is applicable to professional services.1 Act 173 applies to gross receipts received after June 30, 1999.

Act 173 also reverses Hawaii Administrative Rules (HAR) section 18-237-4-01.01 which did not allow the .5% wholesale rate for sales to an eating or drinking retailer of single-serving packets of condiments, unless the packets are resold for a separate charge.2

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: 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.

/s/
RAY K. KAMIKAWA
Director of Taxation


1  Pyramding occurs because the GET is levied on almost all receipts of a business at each transaction in the economic chain.  Thus, the GET accumulates as property or service passes through the economic chain.

2  HAR section 18-237-4-01.01 will be amended to conform to Act 173.