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Department of Taxation Testimony WLH HB 2578 February 12,2020 Page 2 of 2 use of material,parts, or tools imported or purchased by a person licensed under chapter 237 that are used for the construction of work or improvements of a redevelopment project as defined in section 237-_." The Department notes that no corresponding exemption for the purchase of materials and supplies exists in chapter 237, HRS,or Section 11 as currently written. Hence, an item purchased locally would be subject to GET whereas an item imported from an out-of-state unlicensed seller would be exempt from use tax. To resolve these issues, the Department suggests amending Section 12 to correspond to with its suggested amendment to Section 11 as follows: (11) The use of materials, parts, or tools imported or purchased by a licensed seller under chapter 237 that are used in contracting relating to a development redevelopment project that is part of the redevelopment plan adopted by a local redevelopment agency pursuant to chapter 53 . For the purpose of this paragraph, "local redevelopment agency", "redevelopment plan", and "redevelopment project" shall have the same meaning as defined in section 53-1 . The Department suggests including a provision that requires the local development agency certify and notify the Department as to the amounts that may be exempted under the new GET exemption. This will assist the Department in checking compliance with the requirements. The Legislature may also consider removing tools from the tax exemptions because unlike materials and supplies, tools have a useful life beyond the single project for which they are purchased. Finally, the Department respectfully requests that Section 11 and 12 be made effective no earlier than January 1, 2021. This will allow sufficient time to make the necessary form and computer system changes. Thank you for the opportunity to provide comments.