HAR § 18-238-4 — Certain property used by producers

(a) Section 238-4, HRS, provides that if a licensed producer, or a cooperative association (as defined in chapter 421 or under chapter 422, HRS) in order to sell to such producer or a licensed person operating a feed lot, imports into the State or acquires in the State, certain property, as specified in subsection (b), in such a manner and for such purposes as to conform with section 237- 4(4),(5) or (6), HRS, then: (1) If the producer is engaged in the sale of his products at retail or in any manner other than at wholesale, there shall be imposed a use tax of one-half of one per cent, the same as in the case of an importer or a purchaser who is a licensed retailer. (See §18-238-2(h) for deduction and credit procedures, other than the method provided in section 231-23(d), HRS, which a producer who is also a retailer is permitted to use in determining tax liability under chapter 238, HRS). (2) In other such cases, there shall be no tax. (b) The specific property referred to in HRS section 238-4 and subsection (a) are as follows: (1) Cartons and such other containers, wrappers and sacks, and binders to be used for packaging eggs, vegetables, fruits, and other agricultural products; (2) Seedlings and cuttings for producing nursery plants; (3) Chick containers; (4) Poultry or animal feed; (5) Hatching eggs; (6) Semen; (7) Replacement stock; (8) Seed or bait; or (9) Breeding services. (c) Application of the rules contained in subsection (a) may be illustrated by the following examples: Example 1: An agricultural cooperative purchases and imports from an unlicensed seller milking cows and feed for such cows, to be sold to licensed producers who sell all of their products exclusively to “X”, a milk processor. Under subsection (a)(2), use tax shall not be imposed upon the imported milking cows and the feed. Example 2: A licensed poultry farmer imports from an unlicensed seller feed for his egg laying hens. The eggs produced are sold mostly to grocery stores for resale; the balance of the eggs produced are sold to his neighbors and friends living in the vicinity of his farm. Under section 238-4, HRS, and §18-238-4(a)(1), the poultry farmer is liable for a use tax at the rate of one-half of one per cent, the same as in the case of a purchaser who is a licensed retailer, but only on the feed imported and attributable to sales of eggs made to his neighbors and friends. To determine his tax liability he may elect to use one of the methods permitted in §18-238-2(h). Example 3: A licensed feed lot operator imports feed to be used in his pen feeding operations. The cattle entrusted in his care belong to various licensed producers who do not have the proper or necessary pen feeding facilities. Under section 238-4, HRS, and §18-238-4(a)(2), use tax shall not be imposed upon the imported feed. If the feed lot operator imported insecticides for use in maintaining his pen feeding facilities, a use tax at the rate of four per cent would apply because insecticides are not included among the specific property shown in §18-238-4(b).