Haw. Code R. § 18-241-4-05 - Payroll factor
(a) The payroll
factor is a fraction, the numerator of which is the total amount paid in this
State during the taxable year by the taxpayer for compensation and the
denominator of which is the total compensation paid both within and without
this State during the taxable year. The payroll factor shall include only that
compensation which is included in the computation of the apportionable income
tax base for the taxable year.
(b)
The compensation of any employee for services or activities which are connected
with the production of nonbusiness income (income which is not includable in
the apportionable income base) and payments made to any independent contractor
or any other person not properly classifiable as an employee shall be excluded
from both the numerator and denominator of the payroll factor.
(c) Compensation is paid in this State if any
one of the following tests, applied consecutively, is met:
(1) The employee's services are performed
entirely within this State.
(2) The
employee's services are performed both within and without this State, but the
service performed without the State is incidental to the employee's service
within the State. "Incidental" means any service which is temporary or
transitory in nature, or which is rendered in connection with an isolated
transaction.
(3) If the employee's
services are performed both within and without this State, the employee's
compensation shall be attributed to this State:
(A) If the employee's principal base of
operations is within this State;
(B) If there is no principal base of
operations in any state in which some part of the services are performed, but
the place from which the services are directed or controlled is in this State;
or
(C) If the principal base of
operations and the place from which the services are directed or controlled are
not in any state in which some part of the service is performed, but the
employee's residence is in this State.
Notes
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