SECTION 1. The purpose of this Act is to increase the use tax rate paid by wholesalers and apply the amount of the increase to reduce the unfunded liabilities of the Hawaii employer-union trust fund and the employees' retirement system.

SECTION 2. Section 87A-42, Hawaii Revised Statutes, is amended to read as follows:

"§87A-42 Other post-employment benefits trust. (a) Notwithstanding sections 87A-31 and 87A-31.5, the board, upon terms and conditions set by the board, shall establish and administer a separate trust fund for the purpose of receiving employer contributions that will prefund other post-employment health and other benefit plan costs for retirees and their beneficiaries. The separate trust fund shall meet the requirements of the Government Accounting Standards Board regarding other post-employment benefits trusts. The board shall establish and maintain a separate account for each public employer within the separate trust fund to accept and account for each public employer's contributions. Employer contributions to the separate trust fund shall be irrevocable, all assets of the fund shall be dedicated exclusively to providing health and other benefits to retirees and their beneficiaries, and assets of the fund shall not be subject to appropriation for any other purpose and shall not be subject to claims by creditors of the employers or the board or plan administrator. The board's powers under section 87A-24 shall also apply to the fund established pursuant to this section.

(b) Public employer contributions shall be paid into the fund in each fiscal year, and commencing with the 2018-2019 fiscal year, the amount of the annual public employer contribution shall be equal to the amount of the annual required contribution, as determined by an actuary retained by the board.

(c) In any fiscal year subsequent to the 2017-2018 fiscal year in which the state public employer's contributions into the fund are less than the amount of the annual required contribution, the amount that represents the excess of the annual required contribution over the state public employer's contributions shall be deposited into the appropriate account of the separate trust fund from a portion of all general excise tax revenues collected by the department of taxation under section 237-31.

If any general excise tax revenues are deposited into the separate trust fund in any fiscal year as a result of this subsection, the director of finance shall notify the legislature and governor whether the general fund expenditure ceiling for that fiscal year would have been exceeded if those revenues had been legislatively appropriated instead of deposited without appropriation into the trust fund. The notification shall be submitted within thirty days following the end of the applicable fiscal year.

(d) In any fiscal year subsequent to the 2017-2018 fiscal year in which a county public employer's contributions into the fund are less than the amount of the annual required contribution, the amount that represents the excess of the annual required contribution over the county public employer's contributions shall be deposited into the fund from a portion of all transient accommodations tax revenues collected by the department of taxation under section 237D-6.5(b)(3). The director of finance shall deduct the amount necessary to meet the county public employer's annual required contribution from the revenues derived under section 237D-6.5(b)(3) and transfer the amount to the board for deposit into the appropriate account of the separate trust fund.

(e) In any fiscal year subsequent to fiscal year 2017-2018 in which a public employer's contributions into the fund are less than the amount of the annual required contribution and the public employer is not entitled to transient accommodations tax revenues sufficient to satisfy the total amount of the annual required contribution, the public employer's contributions shall be deposited into the fund from portions of any other revenues collected on behalf of the public employer or held by the State. The director of finance shall deduct the amount necessary to meet the public employer's annual required contribution from any revenues collected on behalf of the public employer held by the State and transfer the amount to the board for deposit into the appropriate account of the separate trust fund.

(f) For the purposes of this section, "annual required contribution" means a public employer's required contribution to the trust fund established in this section that is sufficient to cover:

(1) The normal cost, which is the cost of other post-employment benefits attributable to the current year of service; and

(2) An amortization payment, which is a catch-up payment for past service costs to fund the unfunded actuarial accrued liability over the next thirty years.

(g) Nothing in this section shall preclude the deposit of additional funds pursuant to section 238-14."

SECTION 3. Section 88-114, Hawaii Revised Statutes, is amended to read as follows:

"§88-114 Pension accumulation fund. (a) The pension accumulation fund shall be the fund in which shall be accumulated all contributions made by the State and any county and all income from investments and from which shall be paid all benefits, including the bonus authorized under section 88-11, and other than those benefits [~~which~~] that are specifically payable from other funds.

(b) Nothing in this section shall preclude the deposit of additional funds pursuant to section 238-14."

SECTION 4. Section 238-2, Hawaii Revised Statutes, is amended to read as follows:

"§238-2 Imposition of tax on tangible personal property; exemptions. There is hereby levied an excise tax on the use in this State of tangible personal property [~~which~~] that is imported by a taxpayer in this State whether owned, purchased from an unlicensed seller, or however acquired for use in this State. The tax imposed by this chapter shall accrue when the property is acquired by the importer or purchaser and becomes subject to the taxing jurisdiction of the State. The rates of the tax hereby imposed and the exemptions thereof are as follows:

(1) If the importer or purchaser is licensed under chapter 237 and is:

(A) A wholesaler or jobber importing or purchasing for purposes of sale or resale; or

(B) A manufacturer importing or purchasing material or commodities [~~which~~] that are to be incorporated by the manufacturer into a finished or saleable product (including the container or package in which the product is contained) wherein it will remain in [~~such~~] a form [~~as to be~~] that is perceptible to the senses, and which finished or saleable product is to be sold in such a manner as to result in a further tax on the activity of the manufacturer as the manufacturer or as a wholesaler, and not as a retailer,

there shall be no tax; provided that if the wholesaler, jobber, or manufacturer is also engaged in business as a retailer (so classed under chapter 237), paragraph (2) shall apply to the wholesaler, jobber, or manufacturer, but the director of taxation shall refund to the wholesaler, jobber, or manufacturer, in the manner provided under section 231-23(c) [~~such~~] the amount of tax as the wholesaler, jobber, or manufacturer shall, to the satisfaction of the director, establish to have been paid by the wholesaler, jobber, or manufacturer to the director with respect to property which has been used by the wholesaler, jobber, or manufacturer for the purposes stated in this paragraph;

(2) If the importer or purchaser is licensed under chapter 237 and is:

(A) A retailer or other person importing or purchasing for purposes of sale or resale, not exempted by paragraph (1);

(B) A manufacturer importing or purchasing material or commodities [~~which~~] that are to be incorporated by the manufacturer into a finished or saleable product (including the container or package in which the product is contained) wherein it will remain in [~~such~~] a form [~~as to be~~] that is perceptible to the senses, and which finished or saleable product is to be sold at retail in this State, in such a manner as to result in a further tax on the activity of the manufacturer in selling [~~such~~] the products at retail;

(C) A contractor importing or purchasing material or commodities [~~which~~] that are to be incorporated by the contractor into the finished work or project required by the contract and which will remain in [~~such~~] the finished work or project in [~~such~~] a form [~~as to be~~] that is perceptible to the senses;

(D) A person engaged in a service business or calling as defined in section 237-7, or a person furnishing transient accommodations subject to the tax imposed by section 237D-2, in which the import or purchase of tangible personal property would have qualified as a sale at wholesale as defined in section 237-4(a)(8) had the seller of the property been subject to the tax in chapter 237; or

(E) A publisher of magazines or similar printed materials containing advertisements, when the publisher is under contract with the advertisers to distribute a minimum number of magazines or similar printed materials to the public or defined segment of the public, whether or not there is a charge to the persons who actually receive the magazines or similar printed materials,

the tax shall be [~~one-half of one~~] one and one-half per cent of the purchase price of the property, if the purchase and sale are consummated in Hawaii; or, if there is no purchase price applicable thereto, or if the purchase or sale is consummated outside of Hawaii, then [~~one-half of one~~] one and one-half per cent of the value of [~~such~~] the property; and

(3) In all other cases, four per cent of the value of the property.

For purposes of this section, tangible personal property is property that is imported by the taxpayer for use in this State, notwithstanding the fact that title to the property, or the risk of loss to the property, passes to the purchaser of the property at a location outside this State."

SECTION 5. Section 238-14, Hawaii Revised Statutes, is amended to read as follows:

"§238-14 Taxes state realizations. (a) All taxes collected under this chapter shall be state realizations.

(b) Beginning on July 1, 2015, the revenues realized by the State from the use tax imposed pursuant to section 238-2(2) shall be allocated as follows:

(1) Thirty-three and one-third per cent of the revenues shall be deposited to the credit of the general fund;

(2) Thirty-three and one-third per cent of the revenues shall be deposited into the separate trust fund established under section 87A-42; provided that the amount to be deposited into the separate trust fund shall be credited against the State's public employer contribution liability and be in addition to and shall not replace the State's required public employer contribution; and

(3) Thirty-three and one-third per cent of the revenues shall be deposited into the pension accumulation fund established under section 88-114 and shall be credited against the State's public employer contribution liability; provided that the amount deposited into the pension accumulation fund shall be in addition to and shall not replace the required contribution of the State."

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect on July 1, 2015.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	1137
TWENTY-EIGHTH LEGISLATURE, 2015
STATE OF HAWAII