HB 1991: Liquor Tax; Taxation; Alcohol By Volume; Small Craft Producer Pub Licensees

A BILL FOR AN ACT

RELATING TO THE LIQUOR TAX.

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

     SECTION 1.  The legislature finds that the liquor tax rates established under section 244D-4, Hawaii Revised Statutes, have remained unchanged since 1998.  Over the past twenty-seven years, the cost of goods and services in the State has increased significantly due to inflation, as measured by the United States Bureau of Labor Statistics Consumer Price Index for All Urban Consumers (CPI-U).

     The legislature further finds that maintaining the 1998 tax rates in nominal terms fails to reflect the true economic value intended by the original statute and effectively reduces the real tax burden on alcoholic beverages over time.  This erodes the tax base and undermines the purpose of the liquor tax, which includes generating revenue for the State and supporting public health objectives.

     Accordingly, the purpose of this Act is to:

     (1)  Replace the defined liquor categories subject to the liquor tax with alcohol-by-volume categories, but with a separate rate for beer manufactured by a small craft producer pub licensee; and

     (2)  Amend the liquor tax rates to account for inflation since 1998 by applying a CPI-U-based adjustment according to the most recent available data.

     SECTION 2.  Section 244D-1, Hawaii Revised Statutes, is amended as follows:

     1.  By amending the definition of "beer" to read:

     ""Beer" means any alcoholic beverage [obtained]:

     (1)  Obtained by the fermentation or any infusion or decoction of barley, malt, hops, or any other similar product, or any combination thereof in water, and includes ale, porter, brown, stout, lager beer, small beer, and strong beer but does not include sake, known as Japanese rice wine, or cooler beverage[.]; and

     (2)  That contains no more than ten per cent of alcohol by volume."

     2.  By amending the definition of "liquor" to read:

     ""Liquor" has the same meaning as set forth in section 281-1 and includes alcohol, beer, and the [liquor] alcohol-by-volume categories[:  beer, draft beer, cooler beverage, distilled spirits, and wine.] taxed at the applicable rates under section 244D-4(a)."

     3.  By repealing the definitions of "distilled spirits" and "draft beer".

     [""Distilled spirits" means an alcoholic beverage obtained by the distillation of fermented agricultural products, and includes alcohol for beverage use, spirits of wine, whiskey, rum, brandy, and gin, including all dilutions and mixtures thereof, but does not include beer, draft beer, cooler beverage, or wine.

     "Draft beer" means beer in an individual container of five gallons or more."]

     4.  By repealing the definitions of "sparkling wine", "still wine", and "unit price".

     [""Sparkling wine" means champagne and any other effervescent wine charged with more than 0.392 grams of carbon dioxide per 100 milliliters of wine, whether artificially or as a result of secondary fermentation of wine within the container.

     "Still wine" means any nonsparkling wine and shall include those wines containing not more than 0.392 grams of carbon dioxide per 100 milliliters of wine.

     "Unit price" for a liquor category taxed under this chapter shall be equal to the total dollar volume of taxable sales, exclusive of all federal and state excise taxes, reported for such liquor category, divided by the total gallons of taxable sales reported for such liquor category over the same period."]

     5.  By repealing the definition of "wine".

     [""Wine" means the product obtained from normal alcoholic fermentation of the juice of sound ripe grapes or other agricultural products containing natural or added sugar or any such alcoholic beverage to which is added grape brandy, fruit brandy, or spirits of wine, which is distilled from the particular agricultural product or products of which the wine is made and other rectified wine products and by whatever name and which contains not more than twenty-four per cent of alcohol by volume, and includes vermouth and sake, known as Japanese rice wine, but does not include cooler beverage."]

     SECTION 3.  Section 244D-4, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  Every person who sells or uses any liquor in the State not taxable under this chapter, in respect of the transaction by which the person or the person's vendor acquired the liquor, shall pay a gallonage tax that is hereby imposed at the following rates [for the various liquor categories defined in section 244D-1]:

     [On] For the period July 1, 1998, [and thereafter,] to June 30, 2026, the tax rate shall be:

     (1)  $5.98 per wine gallon on distilled spirits;

     (2)  $2.12 per wine gallon on sparkling wine;

     (3)  $1.38 per wine gallon on still wine;

     (4)  $0.85 per wine gallon on cooler beverages;

     (5)  $0.93 per wine gallon on beer other than draft beer; and

     (6)  $0.54 per wine gallon on draft beer;

and at a proportionate rate for any other quantity so sold or used.

     On July 1, 2026, and thereafter, the tax rate shall be:

     (1)  $           per gallon on beverages containing 0.5 per cent or more alcohol by volume but no more than 10 per cent alcohol by volume; provided that the rate shall be 75 cents per gallon on beer manufactured by a person holding a class 18 small craft producer pub license under section 281-31;

     (2)  $           per gallon on beverages containing more than ten per cent alcohol by volume but no more than fifteen per cent alcohol by volume;

     (3)  $           per gallon on beverages containing more than fifteen per cent alcohol by volume but no more than forty per cent alcohol by volume; and

     (4)  $           per gallon on beverages containing more than forty per cent alcohol by volume;

and at a proportionate rate for any other quantity so sold or used."

     SECTION 4.  Section 244D-6, Hawaii Revised Statutes, is amended to read as follows:

     "§244D-6  Return, form, contents.  Every taxpayer shall, on or before the twentieth day of each month, file with the department a return showing all sales of liquor by gallonage and dollar volume in each [liquor category defined in section 244D-1 and taxed] tax rate under section 244D-4(a) made by the taxpayer during the preceding month, showing separately the amount of the nontaxable sales, and the amount of the taxable sales, and the tax payable thereon.  The form and manner of the return shall be prescribed by the department and shall contain any information the department may deem necessary for the proper administration of this chapter."

     SECTION 5.  Section 244D-9, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  Every dealer shall keep a record of all sales of liquor by gallonage and dollar volume in each [liquor category defined in section 244D-1 and taxed] tax rate under section 244D-4(a) made by the dealer, in a form prescribed by the department of taxation.  Every person holding a license under the liquor law, other than a manufacturer's or wholesaler's license, shall keep a record of all purchases by the person of liquor by gallonage and dollar volume in each [liquor category defined in section 244D-1 and taxed] tax rate under section 244D-4(a), in a form prescribed by the department.  All records shall be offered for inspection and examination at any time upon demand by the department and shall be preserved for a period of five years, except that the department may in writing consent to their destruction within the five-year period or may require that they be kept longer.

     The department may by rule require the dealer to keep other records as it may deem necessary for the proper enforcement of this chapter."

     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, 3000.

Report Title:

Liquor Tax; Taxation; Alcohol By Volume; Small Craft Producer Pub Licensees

Description:

Replaces the defined liquor categories subject to the liquor tax with alcohol-by-volume categories, but with a separate rate for beer manufactured by a small craft producer pub licensee.  Adjusts the liquor tax rates for inflation.  Effective 7/1/3000.  (HD2)

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 THE LIQUOR TAX.

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

     SECTION 1.  The legislature finds that the liquor tax rates established under section 244D-4, Hawaii Revised Statutes, have remained unchanged since 1998.  Over the past twenty-seven years, the cost of goods and services in the State has increased significantly due to inflation, as measured by the United States Bureau of Labor Statistics Consumer Price Index for All Urban Consumers (CPI-U).

     The legislature further finds that maintaining the 1998 tax rates in nominal terms fails to reflect the true economic value intended by the original statute and effectively reduces the real tax burden on alcoholic beverages over time.  This erodes the tax base and undermines the purpose of the liquor tax, which includes generating revenue for the State and supporting public health objectives.

     Accordingly, the purpose of this Act is to:

     (1)  Replace the defined liquor categories subject to the liquor tax with alcohol-by-volume categories, but with a separate rate for beer manufactured by a small craft producer pub licensee; and

     (2)  Amend the liquor tax rates to account for inflation since 1998 by applying a CPI-U-based adjustment according to the most recent available data.

     SECTION 2.  Section 244D-1, Hawaii Revised Statutes, is amended as follows:

     1.  By amending the definition of "beer" to read:

     ""Beer" means any alcoholic beverage [obtained]:

     (1)  Obtained by the fermentation or any infusion or decoction of barley, malt, hops, or any other similar product, or any combination thereof in water, and includes ale, porter, brown, stout, lager beer, small beer, and strong beer but does not include sake, known as Japanese rice wine, or cooler beverage[.]; and

     (2)  That contains no more than ten per cent of alcohol by volume."

     2.  By amending the definition of "liquor" to read:

     ""Liquor" has the same meaning as set forth in section 281-1 and includes alcohol, beer, and the [liquor] alcohol-by-volume categories[:  beer, draft beer, cooler beverage, distilled spirits, and wine.] taxed at the applicable rates under section 244D-4(a)."

     3.  By repealing the definitions of "distilled spirits" and "draft beer".

     [""Distilled spirits" means an alcoholic beverage obtained by the distillation of fermented agricultural products, and includes alcohol for beverage use, spirits of wine, whiskey, rum, brandy, and gin, including all dilutions and mixtures thereof, but does not include beer, draft beer, cooler beverage, or wine.

     "Draft beer" means beer in an individual container of five gallons or more."]

     4.  By repealing the definitions of "sparkling wine", "still wine", and "unit price".

     [""Sparkling wine" means champagne and any other effervescent wine charged with more than 0.392 grams of carbon dioxide per 100 milliliters of wine, whether artificially or as a result of secondary fermentation of wine within the container.

     "Still wine" means any nonsparkling wine and shall include those wines containing not more than 0.392 grams of carbon dioxide per 100 milliliters of wine.

     "Unit price" for a liquor category taxed under this chapter shall be equal to the total dollar volume of taxable sales, exclusive of all federal and state excise taxes, reported for such liquor category, divided by the total gallons of taxable sales reported for such liquor category over the same period."]

     5.  By repealing the definition of "wine".

     [""Wine" means the product obtained from normal alcoholic fermentation of the juice of sound ripe grapes or other agricultural products containing natural or added sugar or any such alcoholic beverage to which is added grape brandy, fruit brandy, or spirits of wine, which is distilled from the particular agricultural product or products of which the wine is made and other rectified wine products and by whatever name and which contains not more than twenty-four per cent of alcohol by volume, and includes vermouth and sake, known as Japanese rice wine, but does not include cooler beverage."]

     SECTION 3.  Section 244D-4, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  Every person who sells or uses any liquor in the State not taxable under this chapter, in respect of the transaction by which the person or the person's vendor acquired the liquor, shall pay a gallonage tax that is hereby imposed at the following rates [for the various liquor categories defined in section 244D-1]:

     On July 1, 1998, and thereafter, the tax rate shall be:

     (1)  $5.98 per wine gallon on distilled spirits;

     (2)  $2.12 per wine gallon on sparkling wine;

     (3)  $1.38 per wine gallon on still wine;

     (4)  $0.85 per wine gallon on cooler beverages;

     (5)  $0.93 per wine gallon on beer other than draft beer; and

     (6)  $0.54 per wine gallon on draft beer;

and at a proportionate rate for any other quantity so sold or used.

     On July 1, 2026, and thereafter, the tax rate shall be:

     (1)  $1.00 per gallon on beverages containing 0.5 per cent or more alcohol by volume but no more than 10 per cent alcohol by volume; provided that the rate shall be 75 cents per gallon on beer manufactured by a person holding a class 18 small craft producer pub license under section 281-31;

     (2)  $2.75 per gallon on beverages containing more than ten per cent alcohol by volume but no more than fifteen per cent alcohol by volume;

     (3)  $11.89 per gallon on beverages containing more than fifteen per cent alcohol by volume but no more than forty per cent alcohol by volume; and

     (4)  $13.00 per gallon on beverages containing more than forty per cent alcohol by volume;

and at a proportionate rate for any other quantity so sold or used."

     SECTION 4.  Section 244D-6, Hawaii Revised Statutes, is amended to read as follows:

     "§244D-6  Return, form, contents.  Every taxpayer shall, on or before the twentieth day of each month, file with the department a return showing all sales of liquor by gallonage and dollar volume in each [liquor category defined in section 244D-1 and taxed] tax rate under section 244D-4(a) made by the taxpayer during the preceding month, showing separately the amount of the nontaxable sales, and the amount of the taxable sales, and the tax payable thereon.  The form and manner of the return shall be prescribed by the department and shall contain any information the department may deem necessary for the proper administration of this chapter."

     SECTION 5.  Section 244D-9, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  Every dealer shall keep a record of all sales of liquor by gallonage and dollar volume in each [liquor category defined in section 244D-1 and taxed] tax rate under section 244D-4(a) made by the dealer, in a form prescribed by the department of taxation.  Every person holding a license under the liquor law, other than a manufacturer's or wholesaler's license, shall keep a record of all purchases by the person of liquor by gallonage and dollar volume in each [liquor category defined in section 244D-1 and taxed] tax rate under section 244D-4(a), in a form prescribed by the department.  All records shall be offered for inspection and examination at any time upon demand by the department and shall be preserved for a period of five years, except that the department may in writing consent to their destruction within the five-year period or may require that they be kept longer.

     The department may by rule require the dealer to keep other records as it may deem necessary for the proper enforcement of this chapter."

     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, 3000.

Report Title:

Liquor Tax; Taxation; Alcohol By Volume; Small Craft Producer Pub Licensees

Description:

Replaces the defined liquor categories subject to the liquor tax with alcohol-by-volume categories, but with a separate rate for beer manufactured by a small craft producer pub licensee.  Adjusts the liquor tax rates for inflation.  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 the liquor tax.

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

     SECTION 1.  The legislature finds that the liquor tax rates established under section 244D-4, Hawaii Revised Statutes, have remained unchanged since 1998.  Over the past twenty-seven years, the cost of goods and services in the State has increased significantly due to inflation, as measured by the United States Bureau of Labor Statistics Consumer Price Index for All Urban Consumers (CPI-U).

     The legislature further finds that maintaining the 1998 tax rates in nominal terms fails to reflect the true economic value intended by the original statute and effectively reduces the real tax burden on alcoholic beverages over time.  This erodes the tax base and undermines the purpose of the liquor tax, which includes generating revenue for the State and supporting public health objectives.

     Accordingly, the purpose of this Act is to:

     (1)  Replace the defined liquor categories subject to the liquor tax with alcohol-by-volume categories; and

     (2)  Amend the liquor tax rates to account for inflation since 1998 by applying a CPI-U-based adjustment according to the most recent available data.

     SECTION 2.  Section 244D-1, Hawaii Revised Statutes, is amended as follows:

1.  By amending the definition of "liquor" to read:

     ""Liquor" has the same meaning as set forth in section 281-1 and includes alcohol, and the [liquor] alcohol-by-volume categories[:  beer, draft beer, cooler beverage, distilled spirits, and wine.] taxed at the applicable rates under section 244D-4(a)."

     2.  By deleting the definition of "beer".

     [""Beer" means any alcoholic beverage obtained by the fermentation or any infusion or decoction of barley, malt, hops, or any other similar product, or any combination thereof in water, and includes ale, porter, brown, stout, lager beer, small beer, and strong beer but does not include sake, known as Japanese rice wine, or cooler beverage."]

     3.  By deleting the definition of "cooler beverage".

     [""Cooler beverage" means either a:

     (1)  Wine cooler containing wine and more than fifteen per cent added natural or artificial blending material, such as fruit juices, flavors, flavorings, or adjuncts, water (plain, carbonated, or sparkling), colorings, or preservatives, and that contains less than seven per cent of alcohol by volume; or

     (2)  Malt beverage cooler containing beer and added natural or artificial blending material, such as fruit juices, flavors, flavorings, colorings, or preservatives, and that contains less than seven per cent of alcohol by volume."]

     4.  By deleting the definition of "distilled spirits".

     [""Distilled spirits" means an alcoholic beverage obtained by the distillation of fermented agricultural products, and includes alcohol for beverage use, spirits of wine, whiskey, rum, brandy, and gin, including all dilutions and mixtures thereof, but does not include beer, draft beer, cooler beverage, or wine."]

     5.  By deleting the definition of "draft beer".

     [""Draft beer" means beer in an individual container of five gallons or more."]

     6.  By deleting the definition of "sparkling wine".

     [""Sparkling wine" means champagne and any other effervescent wine charged with more than 0.392 grams of carbon dioxide per 100 milliliters of wine, whether artificially or as a result of secondary fermentation of wine within the container."]

     7.  By deleting the definition of "still wine".

     [""Still wine" means any nonsparkling wine and shall include those wines containing not more than 0.392 grams of carbon dioxide per 100 milliliters of wine."]

     8.  By deleting the definition of "wine".

     [""Wine" means the product obtained from normal alcoholic fermentation of the juice of sound ripe grapes or other agricultural products containing natural or added sugar or any such alcoholic beverage to which is added grape brandy, fruit brandy, or spirits of wine, which is distilled from the particular agricultural product or products of which the wine is made and other rectified wine products and by whatever name and which contains not more than twenty-four per cent of alcohol by volume, and includes vermouth and sake, known as Japanese rice wine, but does not include cooler beverage."]

     SECTION 3.  Section 244D-4, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  Every person who sells or uses any liquor in the State not taxable under this chapter, in respect of the transaction by which the person or the person's vendor acquired the liquor, shall pay a gallonage tax that is hereby imposed at the following rates for the various [liquor] alcohol-by-volume categories [defined in section 244D-1:] listed in the applicable tax rate below:

     On July 1, 1998, and thereafter, the tax rate shall be:

     (1)  $5.98 per wine gallon on distilled spirits;

     (2)  $2.12 per wine gallon on sparkling wine;

     (3)  $1.38 per wine gallon on still wine;

     (4)  $0.85 per wine gallon on cooler beverages;

     (5)  $0.93 per wine gallon on beer other than draft beer; and

     (6)  $0.54 per wine gallon on draft beer;

and at a proportionate rate for any other quantity so sold or used.

     On July 1, 2026, and thereafter, the tax rate shall be:

     (1)  $1.00 per gallon on beverages 9.9 per cent alcohol by volume or lower;

     (2)  $1.75 per gallon on beverages 10 per cent to 15 per cent alcohol by volume;

     (3)  $6.00 per gallon on beverages 16 per cent to 40 per cent alcohol by volume; and

     (4)  $6.50 per gallon on beverages above 40 per cent alcohol by volume;

and at a proportionate rate for any other quantity so sold or used."

     SECTION 4.  Section 244D-6, Hawaii Revised Statutes, is amended to read as follows:

     "§244D-6  Return, form, contents.  Every taxpayer shall, on or before the twentieth day of each month, file with the department a return showing all sales of liquor by gallonage and dollar volume in each [liquor] alcohol-by-volume category [defined in section 244D-1 and] taxed under section 244D-4(a) made by the taxpayer during the preceding month, showing separately the amount of the nontaxable sales, and the amount of the taxable sales, and the tax payable thereon.  The form and manner of the return shall be prescribed by the department and shall contain any information the department may deem necessary for the proper administration of this chapter."

     SECTION 5.  Section 244D-9, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  Every dealer shall keep a record of all sales of liquor by gallonage and dollar volume in each [liquor] alcohol-by-volume category [defined in section 244D-1 and] taxed under section 244D-4(a) made by the dealer, in a form prescribed by the department of taxation.  Every person holding a license under the liquor law, other than a manufacturer's or wholesaler's license, shall keep a record of all purchases by the person of liquor by gallonage and dollar volume in each [liquor] alcohol-by-volume category [defined in section 244D-1 and] taxed under section 244D-4(a), in a form prescribed by the department.  All records shall be offered for inspection and examination at any time upon demand by the department and shall be preserved for a period of five years, except that the department may in writing consent to their destruction within the five-year period or may require that they be kept longer.

     The department may by rule require the dealer to keep other records as it may deem necessary for the proper enforcement of this chapter."

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

     SECTION 7.  This Act shall take effect upon its approval.

Report Title:

Liquor Tax; Taxation; Alcohol By Volume

Description:

Replaces the defined liquor categories subject to the liquor tax with alcohol-by-volume categories.  Adjusts the liquor tax rates for inflation.

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.  1110-26

Honolulu, Hawaii

                , 2026

RE:   H.B. No. 1991

      H.D. 2

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. 1991, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO THE LIQUOR TAX,"

begs leave to report as follows:

     The purpose of this measure is to:

     (1)  Replace the defined liquor categories subject to the liquor tax with alcohol-by-volume categories, but with a separate rate for beer manufactured by a small craft producer pub licensee; and

     (2)  Amend the liquor tax rates to account for inflation.

     Your Committee received testimony in support of this measure from the Hawaii Substance Abuse Coalition; Hawaiʻi Public Health Institute; Bold Like Britt; and numerous individuals.  Your Committee received testimony in opposition to this measure from the Department of Land and Natural Resources; Chamber of Commerce Hawaii; Maui Chamber of Commerce; Beer Lab HI; Aloha Beer Company; Retail Merchants of Hawaii; Maui Brewing Co. Restaurants; Hawaii Food Industry Association; Lanikai Brewing Company LLC; Honolulu Beerworks; Lahaina Brewing Co.; Beer Institute; Brewers Association; Kona Brewing Hawaii; Molson Coors Beverage Company; Hana Koa Brewing Company LLC; Kauai Island Brewing Company; Maui Brewing Co.; Wine Institute; Hawaii Liquor Wholesalers Association; Big Island Brewhaus LLC; Maui Wine; Wailuku Brew Works; and three individuals.  Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

     Your Committee requests subsequent committees to consider whether the alcohol-by-volume framework proposed by this measure is appropriate and beneficial to the State's economy and whether it avoids providing a competitive advantage to importers at the expense of local producers.

     Your Committee has amended this measure by:

     (1)  Changing the liquor tax rates to unspecified amounts; and

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

     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. 1991, H.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as H.B. No. 1991, H.D. 2.

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

STAND. COM. REP. NO.  237-26

Honolulu, Hawaii

                , 2026

RE:   H.B. No. 1991

      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 Consumer Protection & Commerce, to which was referred H.B. No. 1991 entitled:

"A BILL FOR AN ACT RELATING TO THE LIQUOR TAX,"

begs leave to report as follows:

     The purpose of this measure is to modernize the Liquor Tax Law by:

     (1)  Using alcohol by volume as the basis for the tax, rather than the types of liquor; and

     (2)  Increasing the tax rates.

     Your Committee received testimony in support of this measure from the Hawaiʻi Public Health Institute; Hawaii Substance Abuse Coalition; SparksInitiatives; and seven individuals.  Your Committee received testimony in opposition to this measure from Big Island Brewhaus; Lanikai Brewing Company LLC dba Lanikai Spirits; Maui Hotel & Lodging Association; Anheuser-Busch; Beer Institute; Beer Lab HI; Maui Brewing Company; Wine Institute; Hana Koa Brewing Company LLC; Ko Hana Distillers; Lāhainā Brewing Co.; Hawaii Food Industry Association; Maui Chamber of Commerce; Kona Brewing Co.; Kauaʻi Island Brewing Co.; and Hawaii Liquor Wholesales Association.  Your Committee received comments on this measure from the Department of Taxation; Tax Foundation of Hawaii; Chamber of Commerce Hawaii; and Distilled Spirits Council.

     Your Committee finds that the existing liquor tax structure, to an extent, does not adequately address the emergence of newer alcohol products.  The existing liquor tax structure is based on alcohol categories that were historically clearly delineated with different alcohol content with higher rates corresponding to the categories with higher alcohol content and greater risks for abuse and external harms.  However, newer products, such as hard seltzers and ready-to-drink cocktails, straddle these traditional categorical delineations and upend the reasoning for the existing tax structure.  This measure will modernize the Liquor Tax Law to account for emerging alcohol products by taxing alcohol in relation to its corresponding risks of abuse and harm by using alcohol by volume as the basis, rather than the type of liquor.

     Your Committee further finds that the existing liquor tax structure no longer serves as an economic deterrent for alcohol consumption because the rates have not been updated in nearly thirty years.  Alcohol tax increases are one of the strongest prevention strategies to reduce underage drinking and excessive alcohol use in communities.  This measure appropriately updates the rates for the Liquor Tax Law.

     Lastly, your Committee recognizes the economic burden this may place on small producers and believes that relief is appropriate.

     Your Committee notes that the Department of Taxation requested that the effective date of this measure be January 1, 2027, to provide the Department with sufficient time for form and instruction changes and to provide notice to taxpayers.

     Accordingly, your Committee has amended this measure by:

     (1)  Amending the upper and lower limits for the alcohol-by-volume ranges;

     (2)  Amending the tax rates associated with each alcohol-by-volume range;

     (3)  Providing a separate lower rate for beer that contains no more than ten percent of alcohol by volume manufactured by a person holding a class 18 small craft producer pub license;

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

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

     As affirmed by the record of votes of the members of your Committee on Consumer Protection & Commerce that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1991, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1991, H.D. 1, and be referred to your Committee on Finance.

Respectfully submitted on behalf of the members of the Committee on Consumer Protection & Commerce,