HRS § 237-13 — Imposition of tax


§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.
(B) The measure of the tax on manufacturers
is 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 in accordance with
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.
(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.
(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 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.
(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 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.
(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 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 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.