RELATING TO GENERAL EXCISE TAX.

HB1754

HOUSE OF REPRESENTATIVES

H.B. NO.

1754

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

Relating
to general excise tax
.

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

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SECTION
1.
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The legislature finds that Hawaii has
one of the highest costs of living in the nation.
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The general excise tax is levied on nearly all
economic activity, which is passed on to customers in the form of higher
prices.
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This can be alleviated by exempting food and medical services.

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According to the Consumer Price Index,
grocery prices in Hawaii are fifty per cent higher than the
national average.
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Between 2021 and 2022, households in the
Honolulu area spent an average of 17.3 per cent of their expenditure on food.
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In comparison, the average American spent 12.6
per cent on food.
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According to
the United States Department of Agriculture, a Hawaii family of four on the Thrifty
Food Plan spending $1,431 per month on food would save over $687 each year if
food were exempt from the general excise tax.

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Thirty-
nine

states plus the District of Columbia exempt groceries from their sales taxes, and
another five states tax groceries at lower rates than other goods.
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The legislature
finds that it is time for Hawaii to join this majority.

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Health
care further contributes to the higher cost of living.
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Hawaii is one of only a handful of states
that tax medical services and, until Act 47 passed in 2024, the only state to
tax Medicare services.
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Act 47 (2024)
exempted medical and dental services covered by Medicare, Medicaid, and TRICARE
from the General Excise Tax.
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A broader
exemption on all medical and dental services would lighten the tax burden on privately
practicing medical providers and address Hawaii's health professional shortage
by incentivizing qualified physicians to practice in
the State, thus
resulting in lower healthcare costs to
patients.
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According
to a study commissioned by the Grassroot Institute of Hawaii, Hawaii residents
and healthcare professionals would receive a $222 million tax cut
if medical services were exempt from the
general excise tax.

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The purpose of this Act
is to exempt food and medical services from the general excise tax to lower the
cost of living for Hawaii families.

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SECTION 2.
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Chapter
237, Hawaii Revised Statutes, is amended by adding a new section to be
appropriately designated and to read as follows:

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"
�237-
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Exemption
of gross proceeds of sales on food and groceries.
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(a)
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There shall be exempted from, and excluded from the measure of, the
taxes imposed by this chapter all of the gross proceeds arising from the sale
of food and groceries.

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(b)
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This chapter
shall apply to food or groceries that are furnished, prepared, or served as
meals, except:

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(1)
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In the case of
persons sixty years of age or over, or who receive supplemental security income
benefits, or disability or blindness payments under Title I, II, X, XIV, or XVI
or the Social Security Act (42 U.S.C. 301 et set., 401 et seq., 1201 et seq., 1351
et seq., 1381 et seq.) and their spouses, meals prepared by and served in
senior citizens' centers, apartment buildings occupied primarily by such
persons, public or private nonprofit establishments, eating or otherwise, that
feed such persons, private establishments that contract with the appropriate
agency of the State to offer meals for such persons at concessional prices, and
meals prepared for and served to residents of federally subsidized housing for
the elderly;

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(2)
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In the case of
persons sixty years of age or over and persons who are physically or mentally
handicapped or otherwise disabled that they are unable to adequately prepare
all of their meals, meals prepared for and delivered to them and their spouses
at their home by a public or private nonprofit organization or by a private
establishment that contracts with the appropriate state agency to perform such
services at concessional prices;

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(3)
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In
the case of disabled or blind recipients of benefits under Title I, II, X, XIV,
or XVI or the Social Security Act (42 U.S.C. 301 et set., 401 et seq., 1201 et
seq., 1351 et seq., 1381 et seq.), who are residents in a public or private
nonprofit group living arrangement that serves no more than sixteen residents
and is certified by the appropriate state agency or agencies, meals prepared
and served under such arrangement;

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(4)
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In
the case of women and children temporarily residing in public or private
nonprofit shelters for battered women and children, meals prepared and served
by such shelters; and

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(5)
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In
the case of households that do not reside in permanent dwellings and households
that have no fixed mailing addresses, meals prepared for and served by a public
or private nonprofit establishment approved by an appropriate state or local
agency that feeds such individuals by private establishments that contract with
the appropriate agency of the State to offer meals for such individuals at
concessional prices.

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(c)
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As used in this section:

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"Groceries" means any
food or food product for home consumption.
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"Groceries" may be further defined by the department by rule
through the enumeration of items in rules or tax informational release.

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"Food" means
substances, whether in liquid, concentrated, solid, frozen, dried, or
dehydrated form, that are sold for their ingestion or chewing by humans and are
consumed for their taste or nutritional value.
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Food or food ingredients does not

include alcoholic beverages,
tobacco, prepared food, soft drinks, dietary supplements, or food or food
ingredients sold from a vending machine, whether cold or hot; provided that
food or food ingredients sold from a vending machine that is subsequently heated
shall be subject to this chapter.

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"Prepared food" means:

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(1)
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Food sold in a
heated state or heated in by the seller;

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(2)
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Food sold with
eating utensils provided by the seller, including plates, knives, forks,
spoons, chopsticks, glasses, cups, napkins, or straws.
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A plate does not include a container or
packaging used to transport the food; or

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(3)
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Two or more
food ingredients mixed or combined by the seller for sale as a single item,
except:

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(A)
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Food
that is only cut, repackaged, or pasteurized by the seller; or

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(B)
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Raw
eggs, meat, poultry, or foods containing these raw animal foods requiring
cooking by the consumer as recommended by the federal Food and Drug
Administration in Chapter 3, part 401.11 of the Food Code, published by the
Food and Drug Administration, as amended or renumbered, to prevent foodborne
illness.
"

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SECTION
3
.
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Section
237-24.3, Hawaii Revised Statutes, is amended by amending subsection (12) to
read as follows:

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"(12)
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Amounts received
by a hospital, infirmary, medical clinic, health care facility, or pharmacy, or
a medical or dental practitioner, for healthcare-related goods or services [
purchased
under the medicare, medicaid, or TRICARE programs
].
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For the purposes of this paragraph, the
healthcare-related services need not be performed by a medical or dental
practitioner but may be performed by a physician's assistant, nurse, or other
employee under the medical or dental practitioner's direction.
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As used in this paragraph:

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[
"Medicaid"
means the program established under Title XIX of the Social Security Act of
1935, as amended;
]

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"Medical or dental
practitioner" means a physician or osteopathic physician licensed pursuant
to chapter 453; a dentist licensed under chapter 448; an advanced practice
registered nurse licensed pursuant to chapter 457; or a pharmacist licensed
pursuant to chapter 461[
;
]

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[
"Medicare"
means the program established under Title XVIII of the Social Security Act of
1935, as amended; and

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"TRICARE"
means the program of the Department of Defense military health system managed
by the Defense Health Agency, or any successor program
]."

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SECTION 4.
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Statutory material to be repealed is
bracketed and stricken.
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New statutory
material is underscored.

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SECTION 5.
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This Act shall take effect on January 1, 2028.

INTRODUCED BY:

_____________________________

Report Title:

GET;
Exemption; Food; Medical Services; Dental; Minority Caucus Package

Description:

Exempts
food and groceries from the general excise tax.
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Expands the general excise tax exemption implemented in 2024 for certain
medical and dental services to include all medical and dental services.

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