HB 1688: Taxation; General Excise Tax; Aircraft Service and Maintenance

A BILL FOR AN ACT

RELATING TO A GENERAL EXCISE TAX EXEMPTION FOR AIRCRAFT MAINTENANCE.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that many states, including Arizona, California, Colorado, Connecticut, Florida, Georgia, Iowa, Kansas, Massachusetts, Minnesota, New York, North Carolina, Ohio, Pennsylvania, Texas, and Wisconsin, explicitly exempt aircraft parts from their sales tax if sold to an air carrier.  In Hawaii, there is an exemption in the general excise tax law for aircraft servicing and maintenance.  However, the Hawaii Intermediate Court of Appeals has recently decided that the exemption language does not exempt from the general excise tax the sale of parts to an air carrier, even though the complementary use tax law explicitly exempts from the use tax imports of these parts from an out-of-state seller.

     To correct this imbalance, recognize the critical importance of the airline industry to the State, and ensure competitiveness with other states in attracting and maintaining aircraft maintenance jobs and facilities, the purpose of this Act is to provide a general excise tax exemption for the sale of material, parts, or tools that are used for aircraft service and maintenance or for the construction of an aircraft service and maintenance facility.

     SECTION 2.  Section 237-24.9, Hawaii Revised Statutes, is amended by amending its title and subsection (a) to read as follows:

     "§237-24.9  Aircraft service [and], maintenance facility[.], and sale of related materials.  (a)  This chapter shall not apply to amounts received from the servicing and maintenance of aircraft [or], from the construction of an aircraft service and maintenance facility in the State[.], or from the sale of material, parts, or tools to an air carrier, as defined by the Federal Aviation Act of 1958, if they are purchased for aircraft service and maintenance or for the construction of an aircraft service and maintenance facility."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on January 1, 2027.

Report Title:

Taxation; General Excise Tax; Aircraft Service and Maintenance

Description:

Provides a general excise tax exemption for the sale of material, parts, or tools used for aircraft service and maintenance or for the construction of an aircraft service and maintenance facility.  Effective 1/1/2027.  (CD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

RELATING TO A GENERAL EXCISE TAX EXEMPTION FOR AIRCRAFT MAINTENANCE.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that many states, including Arizona, California, Colorado, Connecticut, Florida, Georgia, Iowa, Kansas, Massachusetts, Minnesota, New York, North Carolina, Ohio, Pennsylvania, Texas, and Wisconsin, explicitly exempt aircraft parts from their sales tax if sold to an air carrier.  In Hawaii, there is an exemption in the general excise tax law for aircraft servicing and maintenance.  However, the Hawaii Intermediate Court of Appeals has recently decided that the exemption language does not exempt from the general excise tax the sale of parts to an air carrier, even though the complementary use tax law explicitly exempts from the use tax imports of these parts from an out-of-state seller.

     To correct this imbalance, recognize the critical importance of the airline industry to the State, and ensure competitiveness with other states in attracting and maintaining aircraft maintenance jobs and facilities, the purpose of this Act is to provide a general excise tax exemption for the sale of material, parts, or tools that are used for aircraft service and maintenance or for the construction of an aircraft service and maintenance facility.

     SECTION 2.  Section 237-24.9, Hawaii Revised Statutes, is amended by amending its title and subsection (a) to read as follows:

     "§237-24.9  Aircraft service [and], maintenance facility[.], and sale of related materials.  (a)  This chapter shall not apply to amounts received from the servicing and maintenance of aircraft [or], from the construction of an aircraft service and maintenance facility in the State[.], or from the sale of material, parts, or tools to an air carrier, as defined by the Federal Aviation Act of 1958, if they are purchased for aircraft service and maintenance or for the construction of an aircraft service and maintenance facility."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 2050.

Report Title:

Taxation; General Excise Tax; Aircraft Service and Maintenance

Description:

Provides a general excise tax exemption for the sale of material, parts, or tools used for aircraft service and maintenance or for the construction of an aircraft service and maintenance facility.  Effective 7/1/2050.  (SD2)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

RELATING TO A GENERAL EXCISE TAX EXEMPTION FOR AIRCRAFT MAINTENANCE.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that many states, including Arizona, California, Colorado, Connecticut, Florida, Georgia, Iowa, Kansas, Massachusetts, Minnesota, New York, North Carolina, Ohio, Pennsylvania, Texas, and Wisconsin, explicitly exempt aircraft parts from their sales tax if sold to an air carrier.  In Hawaii, there is an exemption in the general excise tax law for aircraft servicing and maintenance.  However, the Hawaii Intermediate Court of Appeals has recently decided that the exemption language does not exempt from the general excise tax the sale of parts to an air carrier, even though the complementary use tax law explicitly exempts from the use tax imports of these parts from an out-of-state seller.

     To correct this imbalance, recognize the critical importance of the airline industry to the State, and ensure competitiveness with other states in attracting and maintaining aircraft maintenance jobs and facilities, the purpose of this Act is to provide a general excise tax exemption for the sale of material, parts, or tools that are used for aircraft service and maintenance or for the construction of an aircraft service and maintenance facility.

     SECTION 2.  Section 237-24.9, Hawaii Revised Statutes, is amended by amending its title and subsection (a) to read as follows:

     "§237-24.9  Aircraft service [and], maintenance facility[.], and sale of related materials.  (a)  This chapter shall not apply to amounts received from the servicing and maintenance of aircraft [or], from the construction of an aircraft service and maintenance facility in the State[.], or from the sale of material, parts, or tools to an air carrier, as defined by the Federal Aviation Act of 1958, if they are purchased for aircraft service and maintenance or for the construction of an aircraft service and maintenance facility."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on January 1, 2027.

Report Title:

Taxation; General Excise Tax; Aircraft Service and Maintenance

Description:

Provides a general excise tax exemption for the sale of material, parts, or tools used for aircraft service and maintenance or for the construction of an aircraft service and maintenance facility.  Effective 1/1/2027.  (SD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

RELATING TO A GENERAL EXCISE TAX EXEMPTION FOR AIRCRAFT MAINTENANCE.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that many states, including Arizona, California, Colorado, Connecticut, Florida, Georgia, Iowa, Kansas, Massachusetts, Minnesota, New York, North Carolina, Ohio, Pennsylvania, Texas, and Wisconsin, explicitly exempt aircraft parts from their sales tax if sold to an air carrier.  In Hawaii, there is an exemption in the general excise tax law for aircraft servicing and maintenance.  However, the Hawaii Intermediate Court of Appeals has recently decided that the exemption language does not exempt from the general excise tax the sale of parts to an air carrier, even though the complementary use tax law explicitly exempts from the use tax imports of these parts from an out-of-state seller.

     To correct this imbalance, recognize the critical importance of the airline industry to the State, and ensure competitiveness with other states in attracting and maintaining aircraft maintenance jobs and facilities, the purpose of this Act is to provide a general excise tax exemption for the sale of material, parts, or tools that are used for aircraft service and maintenance or for the construction of an aircraft service and maintenance facility.

     SECTION 2.  Section 237-24.9, Hawaii Revised Statutes, is amended by amending its title and subsection (a) to read as follows:

     "§237-24.9  Aircraft service [and], maintenance facility[.], and sale of related materials.  (a)  This chapter shall not apply to amounts received from the servicing and maintenance of aircraft [or], from the construction of an aircraft service and maintenance facility in the State[.], or from the sale of material, parts, or tools to an air carrier, as defined by the Federal Aviation Act of 1958, if they are purchased for aircraft service and maintenance or for the construction of an aircraft service and maintenance facility."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 3000.

Report Title:

Taxation; General Excise Tax; Aircraft Service and Maintenance

Description:

Provides a general excise tax exemption for the sale of material, parts, or tools used for aircraft service and maintenance or for the construction of an aircraft service and maintenance facility.  Effective 7/1/3000.  (HD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

relating to a general excise tax exemption for aircraft maintenance.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that many states, including Arizona, California, Colorado, Connecticut, Florida, Georgia, Iowa, Kansas, Massachusetts, Minnesota, New York, North Carolina, Ohio, Pennsylvania, Texas, and Wisconsin, explicitly exempt aircraft parts from their sales tax if sold to an air carrier.  In Hawaii, there is an exemption in the general excise tax law for aircraft servicing and maintenance.  However, the Hawaii Intermediate Court of Appeals has recently decided that the exemption language does not exempt from the general excise tax the sale of parts to an air carrier, even though the complementary use tax law explicitly exempts from the use tax imports of these parts from an out-of-state seller.  To correct this imbalance, recognize the critical importance of the airline industry to the State, and ensure competitiveness with other states, including those listed above, in attracting and maintaining aircraft maintenance jobs and facilities, the purpose of this Act is to provide a general excise tax exemption for the sale of material, parts, or tools that are used for aircraft service and maintenance or for the construction of an aircraft service and maintenance facility.

     SECTION 2.  Section 237-24.9, Hawaii Revised Statutes, is amended by amending its title and subsection (a) to read as follows:

     "§237-24.9  Aircraft service [and], maintenance facility[.], and sale of related materials.  (a)  This chapter shall not apply to amounts received from the servicing and maintenance of aircraft [or], from the construction of an aircraft service and maintenance facility in the State[.], or from the sale of material, parts, or tools to an air carrier if they are purchased for aircraft service and maintenance or for the construction of an aircraft service and maintenance facility."

     SECTION 3.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 4.  This Act shall take effect on July 1, 2026.

Report Title:

Taxation; General Excise Tax; Aircraft Service and Maintenance

Description:

Provides a general excise tax exemption for the sale of material, parts, or tools used for aircraft service and maintenance or for the construction of an aircraft service and maintenance facility.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

STAND. COM. REP. NO.  1164-26

Honolulu, Hawaii

                , 2026

RE:   H.B. No. 1688

      H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Madame:

     Your Committee on Finance, to which was referred H.B. No. 1688, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO A GENERAL EXCISE TAX EXEMPTION FOR AIRCRAFT MAINTENANCE,"

begs leave to report as follows:

     The purpose of this measure is to provide a general excise tax exemption for the sale of material, parts, or tools used for aircraft service and maintenance or for the construction of an aircraft service and maintenance facility.

     Your Committee received testimony in support of this measure from the Chamber of Commerce Hawaii and Alaska Airlines and Hawaiian Airlines.  Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

     As affirmed by the record of votes of the members of your Committee on Finance that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1688, H.D. 1, and recommends that it pass Third Reading.

Respectfully submitted on behalf of the members of the Committee on Finance,

STAND. COM. REP. NO.  286-26

Honolulu, Hawaii

                , 2026

RE:   H.B. No. 1688

      H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Madame:

     Your Committee on Transportation, to which was referred H.B. No. 1688 entitled:

"A BILL FOR AN ACT RELATING TO A GENERAL EXCISE TAX EXEMPTION FOR AIRCRAFT MAINTENANCE,"

begs leave to report as follows:

     The purpose of this measure is to provide a general excise tax exemption for the sale of material, parts, or tools used for aircraft service and maintenance or for the construction of an aircraft service and maintenance facility.

     Your Committee received testimony in support of this measure from Alaska Airlines and Hawaiian Airlines; Kohala Coast Resort Association; and Activities & Attractions Association of Hawaii, Inc.  Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

     Your Committee finds that the airline industry plays a critical role in Hawaii's economy, supporting tourism, commerce, and the movement of residents and goods throughout the State.  Although existing law provides a general excise tax exemption for aircraft servicing and maintenance, a recent court decision clarified that the exemption does not extend to the sale of material, parts, or tools to air carriers, creating an imbalance in the tax structure and placing Hawaii at a competitive disadvantage compared to numerous other states that explicitly exempt aircraft parts from sales tax.  By extending the general excise tax exemption to include the sale of material, parts, or tools used for aircraft service and maintenance or for the construction of an aircraft service and maintenance facility, this measure corrects the imbalance in existing law and strengthens Hawaii's competitiveness in the aviation industry.

     Your Committee has amended this measure by:

     (1)  Clarifying the term "air carrier";

     (2)  Changing the effective date to July 1, 3000, to encourage further discussion; and

     (3)  Making technical, nonsubstantive amendments for the purposes of clarity, consistency, and style.

     Your Committee notes the Department of Taxation's request for an effective date of January 1, 2027, to allow sufficient time for form and instruction changes and notification of taxpayers.

     As affirmed by the record of votes of the members of your Committee on Transportation that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1688, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1688, H.D. 1, and be referred to your Committee on Finance.

Respectfully submitted on behalf of the members of the Committee on Transportation,