Haw. Code R. § 18-235-35-01 - Sales factor; in general

(a) "Sales" means all gross receipts of the taxpayer not allocated under sections 235-24 to 235-28, HRS. Thus, for the purposes of the sales factor of the apportionment formula for each trade or business of the taxpayer, sales means all gross receipts derived by the taxpayer from transactions and activity in the regular course of that trade or business. The following are rules for determining sales in various situations:

(1) In the case of a taxpayer engaged in manufacturing and selling or purchasing and reselling goods or products, sales includes all gross receipts from the sale of goods or products (or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the tax period) held by the taxpayer primarily for sale to customers in the regular course of its trade or business. Gross receipts for this purpose means gross sales less returns and allowances, and includes all interest income, service charges, carrying charges, or time-price differential charges incidental to those sales. Federal and state excise taxes (including sales taxes and general excise taxes under chapter 237, HRS) shall be included as part of the seller's receipts if the taxes are passed on to the buyer or included as part of the selling price of the product.

(2) In the case of cost plus fixed fee contracts, such as the operation of a government-owned plant for a fee, sales includes the entire reimbursed cost plus the fee.

(3) In the case of a taxpayer engaged in providing services, sales includes the gross receipts from the performance of those services, including fees, commissions, and similar items.

(4) In the case of a taxpayer engaged in renting real or tangible property, sales includes the gross receipts from the rental, lease, or licensing the use of the property.

(5) In the case of a taxpayer engaged in the sale, assignment, or licensing of intangible personal property such as patents and copyrights, sales includes the gross receipts from those activities.

(6) If a taxpayer derives receipts from the sale of equipment used in its business, those receipts constitute sales. For example, a truck express company owns a fleet of trucks and sells its trucks under a regular replacement program. The gross receipts from the sales of the trucks are included in the sales factor. See section 18-235-38-03 for rules that would apply if the sales were occasional.

(b) In some cases certain gross receipts shall be disregarded in determining the sales factor in order that the apportionment formula will operate fairly to apportion to this State the income of the taxpayer's trade or business. See section 18-235-38-03.

(c) In filing returns with this State, if the taxpayer departs from or modifies the basis for excluding or including gross receipts in the sales factor used in returns for prior years, the taxpayer shall disclose in the return for the current year the nature and extent of the modification.

(d) If the returns or reports filed by a taxpayer with all states to which the taxpayer reports under Article IV of the Multistate Tax Compact or the Uniform Division of Income for Tax Purposes Act are not uniform in the inclusion or exclusion of gross receipts, the taxpayer shall disclose in its return to this State the nature and extent of the variance.

Notes

Haw. Code R. § 18-235-35-01

[Eff 11/25/94] (Auth: HRS §§ 231-3(9), 235-118) (Imp: HRS §§ 235-35, 235-117)