SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

REGULATION OF SPORTS WAGERING

§ -1 Definitions. As used in this chapter, unless the context otherwise requires:

"Adjusted gross sports wagering receipts" means gross sports wagering receipts less the total of all sums actually paid out as winnings to patrons, including the monetary value of any merchandise or thing of value awarded as a prize and subject to federal income tax.

"Amateur sports event" means any sports or athletic event that is not a professional sports or athletic event, collegiate sports or athletic event, or youth sports event. "Amateur sports event" includes domestic, international, and Olympic sports or athletic events.

"Approved mobile application or digital platform" means a mobile application or digital platform approved by the department that use the Internet, at least in part, to accept wagers originating in the State or in a state or jurisdiction approved by the department and consistent with federal law.

"Cash" means moneys that have value as legal tender.

"Collegiate sports or athletic event" means an athletic or sporting event in which at least one participant is a team or contestant competing on behalf or under the sponsorship of a public or private institution of higher education, regardless of where the institution is located.

"Department" means the department of commerce and consumer affairs.

"Fantasy sports contest" means a contest in which:

(1) There are no fewer than two participants; provided that all participants are natural persons and a fantasy sports contest operator shall not be construed to be a participant;

(2) Participants own, manage, or coach imaginary teams;

(3) All prizes and awards offered to winning participants are established and made known to participants in advance of the game or contest;

(4) The winning outcome of the game or contest reflects the relative skill of the participants and is determined by statistics generated by actual individuals, including athletes in the case of a sporting event; and

(5) No winning outcome is based solely on the performance of an individual athlete or on the score, point spread, or any performance of any single real-world team or any combination of real-world teams.

"Gross sports wagering receipts" means the total of all cash paid by patrons as wagers.

"License" means any license applied for or issued by the department under this chapter, including but not limited to:

(1) A sports wagering operator license under section -5 to permit a sports wagering operator to operate sports wagering through an approved mobile application or digital platform; and

(2) A sports wagering supplier license under section -6 to sell or lease equipment, systems, or services to be used in connection with sports wagering but not to directly accept wagers.

"National criminal history background check system" means the criminal history record system maintained by the Federal Bureau of Investigation based on fingerprint identification or any other method of positive identification.

"Professional sports or athletic event" means an event at which two or more contestants participate in a sports event or athletic event and one or more participants receive compensation. "Professional sports or athletic event" shall not include events in which the majority of participants are under eighteen years of age.

"Qualified gaming entity" means an entity that offers sports wagering through computers, mobile applications, or digital platforms in no fewer than three jurisdictions in the United States pursuant to a state regulatory structure.

"Sports wagering" means the business of accepting wagers on wagering events or portions of wagering events, the individual performance statistics of individuals in wagering events, or any combination thereof, via a sports wagering operator's approved mobile application or digital platform. "Sports wagering" includes but is not limited to single-game bets, teaser bets, parlays, over-under, moneyline, pools, exchange wagering, in-game wagering, in-play bets, proposition bets, and straight bets. "Sports wagering" shall not include fantasy sports contests.

"Sports wagering account" means a financial record established by a sports wagering operator for an individual patron in which the patron may deposit and withdraw funds for sports wagering and other authorized purchases and to which the licensed sports wagering operator may credit winnings or other amounts due to that patron or authorized by that patron.

"Sports wagering operator" means a sports wagering operator licensee pursuant to section -5.

"Sports wagering supplier" means a sports wagering supplier licensee pursuant to section -6.

"Wager" means a sum of money or thing of value risked on an uncertain occurrence.

"Wagering event" means any professional sports or athletic event, collegiate sports or athletic event, or amateur sports event, including but not limited to an Olympic or international sports or athletic event; a motor vehicle race; electronic sports event, also known as e-sports; and any other event as permitted by the department; provided that the majority of participants in the event are not under eighteen years of age.

"Winnings" means the total of all sums actually paid out, including the monetary value of any merchandise of value awarded as a prize.

"Youth sports event" means an athletic event:

(1) Involving a majority of participants under eighteen years of age; or

(2) In which at least one participant is a team from a public or private elementary, middle, or secondary school, regardless of where the school is located;

provided that if an athletic event meets the definition of "college sports or athletic event" or "professional sports or athletic event", the event shall not be considered a youth sports event regardless of the age of the participants. An international athletic event organized by the International Olympic Committee shall not be considered to be a youth sports event, regardless of the age of the participants.

§ -2 Authorization of sports wagering; license required; rules; emergency rules. (a) Notwithstanding any law to the contrary, sports wagering and ancillary activities shall be lawful when conducted under this chapter and rules adopted under this chapter.

(b) No person or entity shall engage in any activities in the State that require a license under this chapter unless all necessary licenses have been obtained under this chapter and rules adopted under this chapter.

(c) The department shall adopt rules pursuant to chapter 91 to effectuate the purposes of this chapter. The department may adopt emergency rules pursuant to the requirements of sections 91-3 and 91-4; provided that:

(1) The department's determination that there is imminent peril and the reasons therefor shall be stated in, and as a part of, the emergency rule; and

(2) The authority shall make the emergency rule known to the public by publishing the rule, at least once, in a newspaper of general circulation in the State, within five days from the date the rule is filed with the lieutenant governor.

§ -3 Application; criminal history record check. (a) An application for a license or renewal of a license required under this chapter shall be submitted on an application form as prescribed by the department. An application submitted to the department shall include the following:

(1) The full name, current address, and contact information of the applicant;

(2) Disclosure of each person that has control of the applicant as described in subsection (b);

(3) Consent to permit the department to conduct a criminal history record check under subsection (c) of the applicant and each person disclosed under subsection (b)(2);

(4) For the applicant and each person disclosed under subsection (b)(2), a record of previous issuances and denials of a gambling-related license or application in the State or in any other jurisdiction;

(5) For a sports wagering operator applicant, proof that the sports wagering system has been tested and certified for use in another United States jurisdiction by an independent testing laboratory within the last six months; and

(6) Any other information that the department may require by rule.

(b) The following persons shall be considered to have control of an applicant or a licensee:

(1) Each corporate holding company, parent company, or subsidiary company of a corporate applicant or licensee and each person who owns fifteen per cent or more of the corporate applicant or licensee and who has the ability to control the activities of the corporate applicant or licensee or elect a majority of the board of directors of that corporate applicant or licensee, except for a bank or other licensed lending institution that holds a mortgage or other lien acquired in the ordinary course of business;

(2) Each person associated with a noncorporate applicant or licensee that directly or indirectly holds a beneficial or proprietary interest in the noncorporate applicant's or licensee's business operation or that the department otherwise determines has the ability to control the noncorporate applicant or licensee; and

(3) Any executive, employee, or agent of an applicant or licensee who has ultimate decision-making authority over the conduct of the applicant's or licensee's sports wagering operations in the State.

(c) The department shall request a criminal history record check in the form the department requires and submit fingerprints for a national criminal records check against the national criminal history background check system. The fingerprints shall be furnished by all persons required to be named in the application and shall be accompanied by a signed authorization for the release of information by a law enforcement agency in the State and the Federal Bureau of Investigation; provided that an individual who has submitted to a criminal history record check in the State or any other state within the previous twelve months shall not be required to submit to another criminal history record check; provided further that the person shall submit the results of the previous criminal history record check to the department and affirm that there has been no material change in the individual's criminal history since the time of the previous criminal history record check.

(d) A person licensed under this chapter shall give the department written notice within thirty days of any material change to any information provided in the licensee's application for a license or renewal, including any change in the identity of persons considered to have control of the licensee under subsection (b).

(e) The department shall keep information, records, interviews, reports, statements, memoranda, or other data supplied to or used by the department in the course of its review or investigation of an applicant for a sports wagering operator license confidential to the extent the information, records, interviews, reports, statements, memoranda, or other data falls within an exception to public disclosure under chapter 92F. The department shall also keep confidential information pertaining to any applicant or licensee to the extent the information falls within an exception to public disclosure under chapter 92F.

§ -4 Denial of license; reprimand, suspension, and revocation. The department may deny a license to any applicant, reprimand any licensee, or suspend or revoke a license if:

(1) The applicant or licensee has knowingly made a false statement of material fact to the department;

(2) The applicant or licensee has intentionally not disclosed the existence or identity of other persons that have control of the applicant or licensee as required by section -3;

(3) The applicant or licensee has had a license revoked by any government authority responsible for the regulation of gambling or gaming activities;

(4) The applicant or licensee has been convicted of a crime of moral turpitude, gambling-related offense, theft or fraud offense, or has otherwise demonstrated, either by a police record or other satisfactory evidence, a lack of respect for law and order;

(5) The applicant or licensee has not demonstrated to the satisfaction of the department financial responsibility sufficient to adequately meet the requirements of the licensed business or proposed business; or

(6) An applicant or licensee has not met the requirements of this section or any other provision of this chapter.

§ -5 Sports wagering operator license; issuance; fees; term of license; temporary license. (a) The department shall issue a minimum of four sports wagering operator licenses to applicants that meet all requirements of this section, section -3, and rules adopted under this chapter and that have not violated any provision of this chapter; provided that this section shall not be interpreted to direct the department to issue a license to an unqualified applicant. The department shall establish a universal start date for sports wagering operators that is no later than one hundred eighty days after the effective date of this Act. No person shall offer sports wagering in this State before the universal start date.

(b) Only a qualified gaming entity shall be eligible to apply for a sports wagering operator license.

(c) A sports wagering operator license granted by the department pursuant to this section shall grant a licensee the lawful authority to conduct sports wagering through a mobile application or digital platform approved by the department and any rules adopted under this chapter.

(d) The fee for an initial or renewal sports wagering operator license shall be $250,000; provided that the fee shall be retained by the department for the costs of administering this chapter. In addition to the license fee, the department may charge a processing fee for an initial or renewal sports wagering operator license in an amount equal to the projected cost of processing the application and performing any background investigations. If the actual cost exceeds the projected cost, an additional fee may be charged to meet the actual cost; provided that if the projected cost exceeds the actual cost, the difference may be refunded to the applicant or licensee.

(e) Except as provided in subsection (f), a license granted or renewed under this section shall be valid for five years, unless sooner revoked by the department pursuant to section -4.

(f) An applicant for a sports wagering operator license may submit with the application a request to the department to commence sports wagering through a temporary license subject to the universal start date in subsection (a); provided that this request shall include the initial license fee of $250,000 payable to the department. Upon receiving a request for a temporary license, the department shall review the request. If the department determines that the entity requesting the temporary license is a qualified gaming entity, meets the requirements established by rule for a temporary license, has paid the initial license fee for a temporary license, and has submitted an application for a sports wagering operator license and the department is not aware of any reason the applicant is ineligible for a license under this section, the department shall, subject to the limitations and requirements of subsection (a), issue a temporary sports wagering operator license to the qualified gaming entity. A temporary sports wagering operator license issued under this subsection shall be valid for three years or until a final determination on the sports wagering operator license application is made, whichever is sooner. If after investigation the department determines that the applicant is eligible for a sports wagering operator license under this chapter, the department shall issue the initial sports wagering operator license, at which time the temporary license shall be terminated. If after investigation the department determines that the applicant is not eligible for a sports wagering operator license under this chapter, the department shall revoke the temporary license and shall not issue a sports wagering operator license. Sports wagering conducted under the authority of a temporary license shall comply with the sports wagering operator's house rules adopted pursuant to section ‑7.

§ -6 Sports wagering supplier license; issuance; fees; term of license; temporary license. (a) The department shall issue a sports wagering supplier license upon finding that the applicant meets all the requirements of this section, section -3, and rules adopted under this chapter.

(b) An applicant for a sports wagering supplier license shall demonstrate that the equipment, systems, or services that the applicant plans to offer to a sports wagering operator conform to standards established by the department by rule. The department may accept approval by another jurisdiction that is specifically determined by the department to have similar standards for equipment, systems, or services as evidence the applicant meets the standards established by the department.

(c) A sports wagering supplier license granted by the department pursuant to this section shall grant a licensee lawful authority to sell or lease sports wagering equipment, systems, or services to sports wagering operators in the State within the terms and conditions of the license and any rules adopted under this chapter.

(d) The fee for an initial or renewal sports wagering supplier license shall be $10,000; provided that the fee shall be retained by the department for the costs of administering this chapter. In addition to the license fee, the department may charge a processing fee for an initial or renewed license in an amount equal to the projected cost of processing the application and performing any background investigations. If the actual cost exceeds the projected cost, an additional fee may be charged to meet the actual cost; provided that if the projected cost exceeds the actual cost, the difference may be refunded to the applicant or licensee.

(e) Except as provided in subsection (f), a license granted or renewed under this section shall be valid for five years unless sooner revoked by the department under section ‑4.

(f) An applicant for a sports wagering supplier license may submit with the application a request for a temporary license; provided that the request for a temporary license shall include the initial license fee of $10,000. If the department determines that the applicant is qualified under subsection (b), meets the requirements established by rule for a temporary license, and has paid the initial license fee for a temporary license and the department is not aware of any reason the applicant is ineligible for a license under this section, the department shall issue a temporary sports wagering supplier license. A temporary sports wagering supplier license issued under this subsection shall be valid for three years or until a final determination on the sports wagering supplier license application is made, whichever is sooner. If after investigation the department determines that the applicant is eligible for a sports wagering supplier license under this chapter, the department shall issue the initial sports wagering supplier license, at which time the temporary license shall be terminated. If after investigation the department determines that the applicant is not eligible for a sports wagering supplier license under this chapter, the department shall revoke the temporary license and shall not issue a sports wagering supplier license.

§ -7 Sports wagering operator; house rules. (a) A sports wagering operator shall adopt comprehensive house rules for game play governing sports wagering transactions with its patrons. The rules shall specify the amounts to be paid on winning wagers; the circumstances under which the sports wagering operator will void a bet; treatment of errors, late bets, and related contingencies; and the effect of schedule changes. The department shall approve house rules before implementation by a sports wagering operator.

(b) The house rules, together with any other information the department determines to be appropriate, shall be available in the sports wagering system.

§ -8 Sports wagering operator; duties. A sports wagering operator shall:

(1) Employ a monitoring system using software to identify irregularities in volume or odds swings that could signal suspicious activity that requires further investigation; provided that the suspicious activity shall be promptly reported to and investigated by the department; provided further that monitoring system requirements and specifications shall be consistent with industry standards;

(2) Promptly report to the department any facts or circumstances related to the operation of a licensee that constitute a violation of state or federal law and immediately report any suspicious betting over a threshold amount, to be set by the sports wagering operator and approved by the department;

(3) Conduct all sports wagering activities and functions in a manner that does not pose a threat to the public health, safety, or welfare of the residents of the State;

(4) Keep current in all payments and obligations to the department;

(5) Prevent any person from tampering with or interfering with any sports wagering;

(6) Ensure that sports wagering occurs using only an approved mobile application or digital platform;

(7) Conspicuously display in all advertising for sports wagering the availability of the toll-free helpline "1‑800-GAMBLER" or a successor phone number;

(8) At all times, maintain sufficient cash and other supplies to conduct sports wagering;

(9) Maintain daily records showing the gross sports wagering receipts and adjusted gross sports wagering receipts of the licensee; and

(10) Timely file with the department any additional reports required by this chapter or by rule adopted under this chapter.

§ -9 Sports wagering agreements. (a) The department may:

(1) Enter into sports wagering agreements with other states, territories, nations, jurisdictions, governments, or other entities to accept wagers from individuals located outside the State; provided that entering into the sports wagering agreement shall not violate state or federal law; and

(2) Take all necessary actions to ensure that any sports wagering agreement entered into pursuant to this section becomes effective.

(b) The department may adopt rules pursuant to chapter 91 to implement this section.

§ -10 Acceptance of wagers; sports wagering accounts; excluded persons. (a) A sports wagering operator shall accept wagers on wagering events only through an approved mobile application or digital platform or a patron's sports wagering account using an approved mobile application or digital platform. The branding for each approved mobile application or digital platform shall be determined by the sports wagering operator.

(b) A sports wagering account may be established through an approved mobile application or digital platform. A sports wagering operator shall allow patrons to fund a sports wagering account using:

(1) A credit or debit card;

(2) Bonuses or promotions;

(3) Electronic bank transfer;

(4) An online or mobile payment system that supports online money transfers; and

(5) Any other means approved by the department.

(c) A person placing a wager shall be twenty-one years of age or older. A person placing a wager shall be physically located in the State unless the department has entered into a sports wagering agreement pursuant to section -9 to accept wagers from individuals located outside the State. No person shall offer sports wagering at a physical location via kiosks, computer terminals, or other means established for that purpose.

(d) A sports wagering operator may accept layoff wagers placed by other sports wagering operators and may place layoff wagers with other sports wagering operators as long as a sports wagering operator that places a wager with another sports wagering operator informs the sports wagering operator accepting the wager that the wager is being placed by a sports wagering operator and discloses the sports wagering operator's identity.

(e) The department shall establish a voluntary exclusion program for any individual to voluntarily exclude themselves from sports wagering. Sports wagering operators shall use reasonable means to comply with the exclusion of individuals participating in the voluntary exclusion program by the department.

(f) The department shall adopt rules to establish the voluntary exclusion program, including the following:

(1) Verification of the individual's request to be placed in the voluntary exclusion program and for how long, up to and including that individual's lifetime;

(2) How information regarding the identity of individuals who are in the voluntary exclusion program shall be disseminated to sports wagering operators;

(3) How an individual in the voluntary exclusion program may petition the department for removal from the voluntary exclusion program;

(4) The means by which sports wagering operators and their agents shall make all reasonable efforts to cease direct marketing efforts to individuals participating in the voluntary exclusion program; and

(5) The means by which the department shall make available to all sports wagering operators the names of the individuals participating in the voluntary exclusion program; provided that the names shall be made available at least quarterly.

(g) The names of the individuals participating in the voluntary exclusion program shall be treated as confidential by each sports wagering operator. Sports wagering operators conducting sports wagering in another state may share the information provided under this section with its agents and affiliates in other states for excluding individuals participating in the voluntary exclusion program.

(h) No employee of a sports wagering operator shall place a wager on any wagering event through an unapproved or approved mobile application or digital platform of that employee's employer.

§ -11 Sports wagering revenues; tax. (a) For the privilege of holding a license to engage in sports wagering as a sports wagering operator, the tax imposed by section 237-13(9) shall be levied on the licensee. The accrual method of accounting shall be used for purposes of calculating the amount of the tax owed by the licensee. The department shall adopt rules and develop any forms necessary to carry out enforcement of this section. This tax shall be in lieu of all other taxes imposed on the operation of sports wagering or on the proceeds from the operation of sports wagering in this State.

(b) per cent of all taxes collected in this section shall be deposited into the problem gambling prevention and treatment special fund established under section -12.

§ -12 Problem gambling prevention and treatment special fund. (a) There shall be established the problem gambling prevention and treatment special fund into which shall be deposited:

(1) Appropriations by the legislature to the special fund; and

(2) The portion of taxes collected under section -11 for deposit into the problem gambling prevention and treatment special fund.

Any interest and moneys earned on the investments shall be credited to the problem gambling prevention and treatment special fund. Notwithstanding any other provision of law to the contrary, any moneys remaining in the special fund at the end of the biennium shall not revert to the credit of the general fund of the State.

(b) Subject to legislative appropriation, moneys in the problem gambling prevention and treatment special fund shall be expended by the department of health for:

(1) Counseling and other support services for disordered and problem gamers;

(2) Developing and implementing problem gaming treatment and prevention programs; and

(3) Creating and disseminating responsible gaming education and messages.

§ -13 Civil violation. Except as provided in section -14, a violation of any provision of this chapter shall be a civil violation. The department may impose a fine of no more than $5,000 on any person who violates this chapter or $10,000 for all violations resulting from the same occurrence of events. Fines imposed under this chapter shall not be limited to persons licensed under this chapter.

§ -14 Unlicensed sports wagering; penalties. (a) It shall be unlawful for any person to conduct sports wagering without a valid license issued pursuant to this chapter.

(b) Any person convicted of violating this section for an offense and who:

(1) Does not have any prior conviction under this section or under part III of chapter 712, shall be guilty of a misdemeanor; provided that in addition to any other penalties imposed, the person shall be subject to a fine of no less than ;

(2) Has one prior conviction under this section or under part III of chapter 712, shall be guilty of a class C felony; provided that in addition to any other penalties imposed, the person shall be subject to a fine of no less than ; and

(3) Has two or more prior convictions under this section or under part III of chapter 712, shall be guilty of a class B felony; provided that in addition to any other penalties imposed, the person shall be subject to a fine of no less than .

§ -15 Exemption from gambling. Sports wagering operated by a sports wagering operator licensed under and in compliance with this chapter shall not constitute a gambling offense under part III of chapter 712."

SECTION 2. Section 237-13, Hawaii Revised Statutes, is amended to read as follows:

"§237-13 Imposition of tax. There is hereby levied and shall be assessed and collected annually privilege taxes against persons on account of their business and other activities in the State measured by the application of rates against values of products, gross proceeds of sales, or gross income, whichever is specified, as follows:

(1) Tax on manufacturers.

(A) Upon every person engaging or continuing within the State in the business of manufacturing, including compounding, canning, preserving, packing, printing, publishing, milling, processing, refining, or preparing for sale, profit, or commercial use, either directly or through the activity of others, in whole or in part, any article or articles, substance or substances, commodity or commodities, the amount of the tax to be equal to the value of the articles, substances, or commodities, manufactured, compounded, canned, preserved, packed, printed, milled, processed, refined, or prepared for sale, as shown by the gross proceeds derived from the sale thereof by the manufacturer or person compounding, preparing, or printing them, multiplied by one-half of one per cent[.]; and

(B) The measure of the tax on manufacturers [is] shall be the value of the entire product for sale[.];

(2) Tax on business of selling tangible personal property; producing.

(A) Upon every person engaging or continuing in the business of selling any tangible personal property whatsoever, there is likewise hereby levied, and shall be assessed and collected, a tax equivalent to four per cent of the gross proceeds of sales of the business; provided that, in the case of a wholesaler, the tax shall be equal to one-half of one per cent of the gross proceeds of sales of the business; [~~and~~] provided further that insofar as the sale of tangible personal property is a wholesale sale under section 237-4(a)(8), the tax shall be one-half of one per cent of the gross proceeds. Upon every person engaging or continuing within this State in the business of a producer, the tax shall be equal to one-half of one per cent of the gross proceeds of sales of the business, or the value of the products, for sale[.];

(B) Gross proceeds of sales of tangible property in interstate and foreign commerce shall constitute a part of the measure of the tax imposed on persons in the business of selling tangible personal property, to the extent, under the conditions, and under the provisions of the Constitution of the United States and the Acts of the Congress of the United States which may be now in force or may be hereafter adopted, and whenever there occurs in the State an activity to which, under the Constitution and Acts of Congress, there may be attributed gross proceeds of sales, the gross proceeds shall be so attributed[.];

(C) No manufacturer or producer, engaged in such business in the State and selling the manufacturer's or producer's products for delivery outside of the State (for example, consigned to a mainland purchaser via common carrier f.o.b. Honolulu), shall be required to pay the tax imposed in this chapter for the privilege of so selling the products, and the value or gross proceeds of sales of the products shall be included only in determining the measure of the tax imposed upon the manufacturer or producer[.];

(D) A manufacturer or producer, engaged in such business in the State, shall pay the tax imposed in this chapter for the privilege of selling its products in the State, and the value or gross proceeds of sales of the products, thus subjected to tax, may be deducted insofar as duplicated as to the same products by the measure of the tax upon the manufacturer or producer for the privilege of manufacturing or producing in the State; provided that no producer of agricultural products who sells the products to a purchaser who will process the products outside the State shall be required to pay the tax imposed in this chapter for the privilege of producing or selling those products[.];

(E) A taxpayer selling to a federal cost-plus contractor may make the election provided for by paragraph (3)(C), and in that case the tax shall be computed pursuant to the election, notwithstanding this paragraph or paragraph (1) to the contrary[.]; and

(F) The department, by rule, may require that a seller take from the purchaser of tangible personal property a certificate, in a form prescribed by the department, certifying that the sale is a sale at wholesale; provided that:

(i) Any purchaser who furnishes a certificate shall be obligated to pay to the seller, upon demand, the amount of the additional tax that is imposed upon the seller whenever the sale in fact is not at wholesale; and

(ii) The absence of a certificate in itself shall give rise to the presumption that the sale is not at wholesale unless the sales of the business are exclusively at wholesale[.];

(3) Tax upon contractors.

(A) Upon every person engaging or continuing within the State in the business of contracting, the tax shall be equal to four per cent of the gross income of the business[.];

(B) In computing the tax levied under this paragraph, there shall be deducted from the gross income of the taxpayer so much thereof as has been included in the measure of the tax levied under subparagraph (A), on another taxpayer who is a contractor, as defined in section 237-6; provided that any person claiming a deduction under this paragraph shall be required to show in the person's return the name and general excise number of the person paying the tax on the amount deducted by the person[.];

(C) In computing the tax levied under this paragraph against any federal cost-plus contractor, there shall be excluded from the gross income of the contractor so much thereof as fulfills the following requirements:

(i) The gross income exempted shall constitute reimbursement of costs incurred for materials, plant, or equipment purchased from a taxpayer licensed under this chapter, not exceeding the gross proceeds of sale of the taxpayer on account of the transaction; and

(ii) The taxpayer making the sale shall have certified to the department that the taxpayer is taxable with respect to the gross proceeds of the sale, and that the taxpayer elects to have the tax on gross income computed the same as upon a sale to the state government[.]; and

(D) A person who, as a business or as a part of a business in which the person is engaged, erects, constructs, or improves any building or structure, of any kind or description, or makes, constructs, or improves any road, street, sidewalk, sewer, or water system, or other improvements on land held by the person (whether held as a leasehold, fee simple, or otherwise), upon the sale or other disposition of the land or improvements, even if the work was not done pursuant to a contract, shall be liable to the same tax as if engaged in the business of contracting, unless the person shows that at the time the person was engaged in making the improvements the person intended, and for the period of at least one year after completion of the building, structure, or other improvements the person continued to intend to hold and not sell or otherwise dispose of the land or improvements. The tax in respect of the improvements shall be measured by the amount of the proceeds of the sale or other disposition that is attributable to the erection, construction, or improvement of such building or structure, or the making, constructing, or improving of the road, street, sidewalk, sewer, or water system, or other improvements. The measure of tax in respect of the improvements shall not exceed the amount [~~which~~] that would have been taxable had the work been performed by another, subject as in other cases to the deductions allowed by subparagraph (B). Upon the election of the taxpayer, this paragraph may be applied notwithstanding that the improvements were not made by the taxpayer, or were not made as a business or as a part of a business, or were made with the intention of holding the same. However, this paragraph shall not apply in respect of any proceeds that constitute or are in the nature of rent, which shall be taxable under paragraph (9); provided that insofar as the business of renting or leasing real property under a lease is taxed under section 237-16.5, the tax shall be levied by section 237-16.5[.];

(4) Tax upon theaters, amusements, radio broadcasting stations, etc.

(A) Upon every person engaging or continuing within the State in the business of operating a theater, opera house, moving picture show, vaudeville, amusement park, dance hall, skating rink, radio broadcasting station, or any other place at which amusements are offered to the public, the tax shall be equal to four per cent of the gross income of the business, and in the case of a sale of an amusement at wholesale under section 237‑4(a)(13), the tax shall be one-half of one per cent of the gross income[.]; and

(B) The department may require that the person rendering an amusement at wholesale take from the licensed seller a certificate, in a form prescribed by the department, certifying that the sale is a sale at wholesale; provided that:

(i) Any licensed seller who furnishes a certificate shall be obligated to pay to the person rendering the amusement, upon demand, the amount of additional tax that is imposed upon the seller whenever the sale is not at wholesale; and

(ii) The absence of a certificate in itself shall give rise to the presumption that the sale is not at wholesale unless the person rendering the sale is exclusively rendering the amusement at wholesale[.];

(5) Tax upon sales representatives, etc. Upon every person classified as a representative or purchasing agent under section 237-1, engaging or continuing within the State in the business of performing services for another, other than as an employee, there is likewise hereby levied and shall be assessed and collected a tax equal to four per cent of the commissions and other compensation attributable to the services so rendered by the person[.];

(6) Tax on service business.

(A) Upon every person engaging or continuing within the State in any service business or calling including professional services not otherwise specifically taxed under this chapter, there is likewise hereby levied and shall be assessed and collected a tax equal to four per cent of the gross income of the business, and in the case of a wholesaler under section 237-4(a)(10), the tax shall be equal to one-half of one per cent of the gross income of the business[.];

(B) The department may require that the person rendering a service at wholesale take from the licensed seller a certificate, in a form prescribed by the department, certifying that the sale is a sale at wholesale; provided that:

(i) Any licensed seller who furnishes a certificate shall be obligated to pay to the person rendering the service, upon demand, the amount of additional tax that is imposed upon the seller whenever the sale is not at wholesale; and

(ii) The absence of a certificate in itself shall give rise to the presumption that the sale is not at wholesale unless the person rendering the sale is exclusively rendering services at wholesale[.];

(C) Where any person is engaged in the business of selling interstate or foreign common carrier telecommunication services within and without the State, other than as a home service provider, the tax shall be imposed on that portion of gross income received by a person from service [~~which~~] that is originated or terminated in this State and is charged to a telephone number, customer, or account in this State notwithstanding any other state law (except for the exemption under section 237-23(a)(1)) to the contrary. If, under the Constitution and laws of the United States, the entire gross income as determined under this paragraph of a business selling interstate or foreign common carrier telecommunication services cannot be included in the measure of the tax, the gross income shall be apportioned as provided in section 237-21; provided that the apportionment factor and formula shall be the same for all persons providing those services in the State[.]; and

(D) Where any person is engaged in the business of a home service provider, the tax shall be imposed on the gross income received or derived from providing interstate or foreign mobile telecommunications services to a customer with a place of primary use in this State when the services originate in one state and terminate in another state, territory, or foreign country; provided that all charges for mobile telecommunications services [~~which~~] that are billed by or for the home service provider are deemed to be provided by the home service provider at the customer's place of primary use, regardless of where the mobile telecommunications originate, terminate, or pass through; provided further that the income from charges specifically derived from interstate or foreign mobile telecommunications services, as determined by books and records that are kept in the regular course of business by the home service provider in accordance with section 239-24, shall be apportioned under any apportionment factor or formula adopted under subparagraph (C). Gross income shall not include:

(i) Gross receipts from mobile telecommunications services provided to a customer with a place of primary use outside this State;

(ii) Gross receipts from mobile telecommunications services that are subject to the tax imposed by chapter 239;

(iii) Gross receipts from mobile telecommunications services taxed under section 237-13.8; and

(iv) Gross receipts of a home service provider acting as a serving carrier providing mobile telecommunications services to another home service provider's customer[.];

For the purposes of this paragraph, "charges for mobile telecommunications services", "customer", "home service provider", "mobile telecommunications services", "place of primary use", and "serving carrier" have the same meaning as in section 239-22.

(7) Tax on insurance producers. Upon every person engaged as a licensed producer pursuant to chapter 431, there is hereby levied and shall be assessed and collected a tax equal to 0.15 per cent of the commissions due to that activity[.];

(8) Tax on receipts of sugar benefit payments. Upon the amounts received from the United States government by any producer of sugar (or the producer's legal representative or heirs), as defined under and by virtue of the Sugar Act of 1948, as amended, or other Acts of the Congress of the United States relating thereto, there is hereby levied a tax of one-half of one per cent of the gross amount received; provided that the tax levied hereunder on any amount so received and actually disbursed to another by a producer in the form of a benefit payment shall be paid by the person or persons to whom the amount is actually disbursed, and the producer actually making a benefit payment to another shall be entitled to claim on the producer's return a deduction from the gross amount taxable hereunder in the sum of the amount so disbursed. The amounts taxed under this paragraph shall not be taxable under any other paragraph, subsection, or section of this chapter[.];

(9) Tax on licensed sports wagering. Upon every person engaged in sports wagering as a licensed sports wagering operator or sports wagering supplier in the State pursuant to chapter , there is hereby levied and shall be assessed and collected a tax equal to ten per cent of the adjusted gross sports wagering receipts. For purposes of this paragraph, "adjusted gross sports wagering receipts" has the same meaning as in section -1; and

[~~(9)~~] (10) Tax on other business. Upon every person engaging or continuing within the State in any business, trade, activity, occupation, or calling not included in the preceding paragraphs or any other provisions of this chapter, there is likewise hereby levied and shall be assessed and collected, a tax equal to four per cent of the gross income thereof. In addition, the rate prescribed by this paragraph shall apply to a business taxable under one or more of the preceding paragraphs or other provisions of this chapter, as to any gross income thereof not taxed thereunder as gross income or gross proceeds of sales or by taxing an equivalent value of products, unless specifically exempted."

SECTION 3. Section 712-1220, Hawaii Revised Statutes, is amended by amending the definitions of "contest of chance" and "gambling" to read as follows:

""Contest of chance" means any contest, game, gaming scheme, or gaming device in which the outcome depends in a material degree upon an element of chance, notwithstanding that skill of the contestants may also be a factor therein. "Contest of chance" does not include sports wagering under chapter or fantasy sports contests as defined in section -1.

"Gambling" [~~A person engages in gambling if he stakes or risks~~] means staking or risking something of value upon the outcome of a contest of chance or a future contingent event not under [~~his~~] the person's control or influence, upon an agreement or understanding that [he] the person or someone else will receive something of value in the event of a certain outcome. "Gambling" does not include [~~bona~~]:

(1) Bona fide business transactions valid under the law of contracts, including but not limited to contracts for the purchase or sale at a future date of securities or commodities[~~, and agreements~~];

(2) Agreements to compensate for loss caused by the happening of chance, including but not limited to contracts of indemnity or guaranty and life, health, or accident insurance[.];

(3) Sports wagering authorized under chapter and placing wagers on wagering events or portions of wagering events, the individual performance statistics of individuals in wagering events, or any combination thereof, by any system or method of wagering under chapter ; and

(4) Fantasy sports contests as defined in section -1."

SECTION 4. Section 846-2.7, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Criminal history record checks may be conducted by:

(1) The department of health or its designee on operators of adult foster homes for individuals with developmental disabilities or developmental disabilities domiciliary homes and their employees, as provided by section 321-15.2;

(2) The department of health or its designee on prospective employees, persons seeking to serve as providers, or subcontractors in positions that place them in direct contact with clients when providing non-witnessed direct mental health or health care services as provided by section 321-171.5;

(3) The department of health or its designee on all applicants for licensure or certification for, operators for, prospective employees, adult volunteers, and all adults, except adults in care, at healthcare facilities as defined in section 321-15.2;

(4) The department of education on employees, prospective employees, and teacher trainees in any public school in positions that necessitate close proximity to children as provided by section 302A-601.5;

(5) The counties on employees and prospective employees who may be in positions that place them in close proximity to children in recreation or child care programs and services;

(6) The county liquor commissions on applicants for liquor licenses as provided by section 281-53.5;

(7) The county liquor commissions on employees and prospective employees involved in liquor administration, law enforcement, and liquor control investigations;

(8) The department of human services on operators and employees of child caring institutions, child placing organizations, and resource family homes as provided by section 346-17;

(9) The department of human services on prospective adoptive parents as established under section 346-19.7;

(10) The department of human services or its designee on applicants to operate child care facilities, household members of the applicant, prospective employees of the applicant, and new employees and household members of the provider after registration or licensure as provided by section 346-154, and persons subject to section 346-152.5;

(11) The department of human services on persons exempt pursuant to section 346-152 to be eligible to provide child care and receive child care subsidies as provided by section 346-152.5;

(12) The department of health on operators and employees of home and community-based case management agencies and operators and other adults, except for adults in care, residing in community care foster family homes as provided by section 321-15.2;

(13) The department of human services on staff members of the Hawaii youth correctional facility as provided by section 352-5.5;

(14) The department of human services on employees, prospective employees, and volunteers of contracted providers and subcontractors in positions that place them in close proximity to youth when providing services on behalf of the office or the Hawaii youth correctional facility as provided by section 352D-4.3;

(15) The judiciary on employees and applicants at detention and shelter facilities as provided by section 571-34;

(16) The department of corrections and rehabilitation on employees and prospective employees, volunteers, contract service providers, and subcontract service providers who are directly involved with the treatment and care of, or directly involved in providing correctional programs and services to, persons committed to a correctional facility, or placed in close proximity to persons committed when providing services on behalf of the department or the correctional facility, as provided by section 353-1.5 and the department of law enforcement on employees and prospective employees whose duties involve or may involve the exercise of police powers including the power of arrest as provided by section 353C-5;

(17) The board of private detectives and guards on applicants for private detective or private guard licensure as provided by section 463-9;

(18) Private schools and designated organizations on employees and prospective employees who may be in positions that necessitate close proximity to children; provided that private schools and designated organizations receive only indications of the states from which the national criminal history record information was provided pursuant to section 302C-1;

(19) The public library system on employees and prospective employees whose positions place them in close proximity to children as provided by section 302A-601.5;

(20) The State or any of its branches, political subdivisions, or agencies on applicants and employees holding a position that has the same type of contact with children, vulnerable adults, or persons committed to a correctional facility as other public employees who hold positions that are authorized by law to require criminal history record checks as a condition of employment as provided by section 78-2.7;

(21) The department of health on licensed adult day care center operators, employees, new employees, subcontracted service providers and their employees, and adult volunteers as provided by section 321-15.2;

(22) The department of human services on purchase of service contracted and subcontracted service providers and their employees and volunteers, as provided by sections 346-2.5 and 346-97;

(23) The department of human services on foster grandparent program, senior companion program, and respite companion program participants as provided by section 346-97;

(24) The department of human services on contracted and subcontracted service providers and their current and prospective employees that provide home and community-based services under section 1915(c) of the Social Security Act, title 42 United States Code section 1396n(c), or under any other applicable section or sections of the Social Security Act for the purposes of providing home and community-based services, as provided by section 346-97;

(25) The department of commerce and consumer affairs on proposed directors and executive officers of a bank, savings bank, savings and loan association, trust company, and depository financial services loan company as provided by section 412:3-201;

(26) The department of commerce and consumer affairs on proposed directors and executive officers of a nondepository financial services loan company as provided by section 412:3-301;

(27) The department of commerce and consumer affairs on the original chartering applicants and proposed executive officers of a credit union as provided by section 412:10-103;

(28) The department of commerce and consumer affairs on:

(A) Each principal of every non-corporate applicant for a money transmitter license;

(B) Each person who upon approval of an application by a corporate applicant for a money transmitter license will be a principal of the licensee; and

(C) Each person who upon approval of an application requesting approval of a proposed change in control of licensee will be a principal of the licensee,

as provided by sections 489D-9 and 489D-15;

(29) The department of commerce and consumer affairs on applicants for licensure and persons licensed under title 24;

(30) The Hawaii health systems corporation on:

(A) Employees;

(B) Applicants seeking employment;

(D) Current or prospective volunteers, providers, or contractors,

in any of the corporation's health facilities as provided by section 323F-5.5;

(31) The department of commerce and consumer affairs on:

(A) An applicant for a mortgage loan originator license, or license renewal; and

(B) Each control person, executive officer, director, general partner, and managing member of an applicant for a mortgage loan originator company license or license renewal,

as provided by chapter 454F;

(32) The state public charter school commission or public charter schools on employees, teacher trainees, prospective employees, and prospective teacher trainees in any public charter school for any position that places them in close proximity to children, as provided in section 302D-33;

(33) The counties on prospective employees who work with children, vulnerable adults, or senior citizens in community-based programs;

(34) The counties on prospective employees for fire department positions that involve contact with children or vulnerable adults;

(35) The counties on prospective employees for emergency medical services positions that involve contact with children or vulnerable adults;

(36) The counties on prospective employees for emergency management positions and community volunteers whose responsibilities involve planning and executing homeland security measures including viewing, handling, and engaging in law enforcement or classified meetings and assisting vulnerable citizens during emergencies or crises;

(37) The State and counties on employees, prospective employees, volunteers, and contractors whose position responsibilities require unescorted access to secured areas and equipment related to a traffic management center;

(38) The State and counties on employees and prospective employees whose positions involve the handling or use of firearms for other than law enforcement purposes;

(39) The State and counties on current and prospective systems analysts and others involved in an agency's information technology operation whose position responsibilities provide them with access to proprietary, confidential, or sensitive information;

(40) The department of commerce and consumer affairs on:

(A) Applicants for real estate appraiser licensure or certification as provided by chapter 466K;

(B) Each person who owns more than ten per cent of an appraisal management company who is applying for registration as an appraisal management company, as provided by section 466M-7; and

(C) Each of the controlling persons of an applicant for registration as an appraisal management company, as provided by section 466M-7;

(41) The department of health or its designee on:

(A) Individual applicants or individuals acting on behalf of applying entities for hemp processor permits as provided under section 328G-2; and

(B) All license applicants, licensees, employees, contractors, and prospective employees of medical cannabis dispensaries, and individuals permitted to enter and remain in medical cannabis dispensary facilities as provided under sections 329D-15(a)(4) and 329D-16(a)(3);

(42) The department of commerce and consumer affairs on applicants for nurse licensure or license renewal, reactivation, or restoration as provided by sections 457-7, 457-8, 457-8.5, and 457-9;

(43) The county police departments on applicants for permits to acquire firearms pursuant to section 134-2, on individuals registering their firearms pursuant to section 134-3, and on applicants for new or renewed licenses to carry a pistol or revolver and ammunition pursuant to section 134-9;

(44) The department of commerce and consumer affairs on:

(A) Each of the controlling persons of the applicant for licensure as an escrow depository, and each of the officers, directors, and principals who will be in charge of the escrow depository's activities upon licensure; and

(B) Each of the controlling persons of an applicant for proposed change in control of an escrow depository licensee, and each of the officers, directors, and principals who will be in charge of the licensee's activities upon approval of the application,

as provided by chapter 449;

(45) The department of taxation on current or prospective employees or contractors who have access to federal tax information in order to comply with requirements of federal law, regulation, or procedure, as provided by section 231-1.6;

(46) The department of labor and industrial relations on current or prospective employees or contractors who have access to federal tax information in order to comply with requirements of federal law, regulation, or procedure, as provided by section 383-110;

(47) The department of human services on current or prospective employees or contractors who have access to federal tax information in order to comply with requirements of federal law, regulation, or procedure, and on current or prospective employees, volunteers, contractors, or contractors' employees or volunteers, subcontractors, or subcontractors' employees or volunteers, whose position places or would place them in close proximity to minors, young adults, or vulnerable adults, as provided by section 346-2.5;

(48) The child support enforcement agency on current or prospective employees, or contractors who have access to federal tax information in order to comply with federal law, regulation, or procedure, as provided by section 576D-11.5;

(49) The department of the attorney general on current or prospective employees or employees or agents of contractors who have access to federal tax information to comply with requirements of federal law, regulation, or procedure, as provided by section 28-17;

(50) The department of commerce and consumer affairs on each control person, executive officer, director, general partner, and managing member of an installment loan licensee, or an applicant for an installment loan license, as provided in chapter 480J;

(51) The university of Hawaii on current and prospective employees and contractors whose duties include ensuring the security of campus facilities and persons; [~~and~~]

(52) The department of commerce and consumer affairs on applicants and licensees pursuant to chapter ; and

[~~(52)~~] (53) Any other organization, entity, or the State, its branches, political subdivisions, or agencies as may be authorized by state law."

SECTION 5. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

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; provided that the amendments made to section 846-2.7(b), Hawaii Revised Statutes, by section 4 of this Act shall not be repealed when that section is reenacted on July 1, 2027, pursuant to section 4 of Act 110, Session Laws of Hawaii 2024.

HOUSE OF REPRESENTATIVES	H.B. NO.	1308
THIRTY-THIRD LEGISLATURE, 2025		H.D. 2
STATE OF HAWAII