Relating To General Excise Tax.
HB1339 would amend Hawaii’s General Excise Tax law to exempt the gross proceeds from sales of food and groceries from the tax, while also broadening an existing 2024 exemption for medical and dental services. The bill defines “food,” “groceries,” and “prepared food,” and it generally excludes groceries for home consumption from taxation, while keeping prepared meals taxable except for specified meal programs serving seniors, disabled persons, shelters, and certain unhoused households. It also clarifies that some food items remain taxable, including alcohol, tobacco, soft drinks, dietary supplements, vending machine food, and certain prepared foods.
In addition to the grocery exemption, the bill revises Act 47 (Session Laws of Hawaii 2024) so that the medical-services exemption is no longer limited to services purchased under Medicare, Medicaid, or TRICARE. Instead, it would extend the exemption to amounts received by hospitals, clinics, pharmacies, and medical or dental practitioners for healthcare-related goods or services more broadly, including services performed by staff under a practitioner’s direction. The bill would take effect on January 1, 2027.
The bill would significantly narrow the tax base of Hawaii’s General Excise Tax by removing tax from grocery sales and expanding the exemption for medical and dental services. It would amend Chapter 237, Hawaii Revised Statutes, by adding a new food-and-groceries exemption and would modify Act 47 (2024) to broaden the healthcare exemption beyond federally covered programs. The practical effect would be lower tax liability for food retailers, consumers, healthcare providers, and patients, with the largest benefits aimed at households facing high food costs and at medical providers and patients paying for privately covered care.
The bill text reflects strongly supportive policy framing, emphasizing Hawaii’s high cost of living, high grocery prices, and the burden of taxing food and healthcare. The available context does not include committee testimony or recorded votes, so there is no documented opposition or amendment activity in the materials provided. Based on the bill’s findings and description, the measure is presented as a cost-of-living relief proposal with a pro-consumer and pro-healthcare-provider orientation.
The main policy tensions are likely to center on revenue loss, the scope of the grocery exemption, and the breadth of the medical-services exemption. The bill argues that the State’s surplus can absorb the tax reduction, but critics could question whether exempting food and a wide range of medical and dental services would reduce General Excise Tax collections too much or create administrative complexity in defining taxable versus exempt prepared foods. Another likely point of contention is whether the exemption should be limited to federally covered medical services, as in Act 47, or expanded to all medical and dental services as this bill proposes.