Haw. Code R. § 18-251-1-04 - "Rent or lease", defined; complimentary vehicles

Current through February, 2022

(a) As used in this chapter:

"Acknowledgment" means the same as the acknowledgment required by section 437D-11, HRS.

"Collision damage waiver" means any contract or contractual provision whether separate from or a part of a rental agreement, whereby the lessor agrees, for a charge, to waive any or all claims against the lessee for damages to the rental motor vehicle during the term of the rental agreement.

"Rent or lease" means granting temporary possession and use of a motor vehicle or vehicle to a person for consideration, whether or not the lessor receives monetary income from the granting of temporary possession and use of the motor vehicle or vehicle. Consideration received from the rental or lease of a motor vehicle or vehicle includes but is not limited to any money, promise, act, acknowledgment of liability, forbearance, interest, value, gain, advantage, benefit, payment in return for a waiver of legal rights, or profit offered by one party to another in return for the other party's act or promise.

Example: ABC Cars and Hawaii Hotel combine their services and sell room and car packages to tourists. ABC Cars also agrees to give Hawaii Hotel use of several luxury cars for two days in exchange for the use of a hotel suite for several nights. Cars used for the room and car packages are subject to the surcharge tax. ABC Cars does not receive cash from Hawaii Hotel for the hotel's use of the luxury cars; nevertheless, because ABC Cars receives consideration in the form of the use of a hotel suite in exchange for the hotel's use of the luxury cars, the luxury cars are also subject to the rental motor vehicle surcharge tax.

(b) Motor vehicles or vehicles provided in conjunction with public relations and promotional activities, such as familiarization trips (commonly known as "fam trips") and get-away prize packages, shall be subject to the rental motor vehicle surcharge tax.

Example: ABC Cars participates in a visitor industry project to encourage travel agents to cultivate Hawaii as a vacation destination by providing 6 cars for a one-week familiarization tour of the islands. All 6 of the cars are subject to the rental motor vehicle surcharge tax as follows: $2 a day for 7 days, for 6 cars totaling $84 ($14 x 6) surcharge tax due.

Example: In conjunction with a company promotion, DEF Cars (DEF) gives away coupons to its special customers for "free rentals", no rental rate charge for one day. All customers, including those renting a car for one day or less, who use their coupons are asked to sign rental agreements and contract for a collision damage waiver or to sign an acknowledgment. Cars used by customers in this promotion are subject to the rental motor vehicle surcharge tax for each day's rental, including the day for which no rental rate is charged.

Example: GHI Rentals (GHI) has a "frequent GHI driver" program, which gives a free day's rental after a customer has rented a car from GHI five times. After the customer has rented a car from GHI on five occasions, the customer does not pay the rental fee on the next (or sixth) rental. All customers receiving a free rental are asked to sign rental agreements and contract for a collision damage waiver or to sign an acknowledgment. Cars used by customers for the sixth rental period, which are provided without charge, in the GHI frequent driver program are subject to the rental motor vehicle surcharge tax.

(c) "Rent or lease" shall not apply to a motor vehicle or vehicle if a lessor provides a motor vehicle or vehicle to any person without receiving any consideration and the liability for the motor vehicle or vehicle remains solely with the lessor and is not acknowledged, shared by or paid for by the person using the motor vehicle or vehicle. These complimentary motor vehicles or vehicles may include motor vehicles or vehicles furnished to nonprofit charitable or educational corporations, associations, or similar organizations exempt from tax under the federal Internal Revenue Code of 1986, as amended, in conjunction with a charitable or educational project.

Example: Rental Car Company is a sole proprietorship. During the summer, Rental Car Company's owner allows his visiting friends from the mainland to use the rental cars without charge. Rental Car Company does not log the use of the cars on its books, nor are the Rental Car Company's owner's friends required to sign a rental agreement, acknowledge liability, provide insurance or proof of insurance, or sign a collision damage waiver or an acknowledgment. The cars are not rented or leased because neither Rental Car Company nor its owner receive any consideration. The cars, therefore, are not subject to the rental motor vehicle surcharge tax when they are loaned to the owner's friends.

Example: ABC Charities (ABC) approaches XYZ Cars (XYZ) and asks for a contribution from XYZ to support one of its projects. Instead of giving cash, XYZ allows ABC to use one of its cars without paying the rental fee for the length the project. XYZ asks ABC to provide proof of insurance coverage in case there is an accident involving the car during the time ABC is using the car. Thus, while XYZ, as owner of the car, may be liable in the case of an accident, ABC also has acknowledged its liability for any possible damage that may occur while using the car. Accordingly, although ABC is not charged the rental fee, XYZ receives consideration, ABC's acknowledgment of its shared liability for the car while using the car, and the car is subject to the rental motor vehicle surcharge tax.

Example: Hawaii Rent-A-Car Agency allows a private nonprofit organization to use one of Hawaii Rent-A-Car Agency's station wagons for a month for a public service project. The organization does not pay any money to Hawaii Rent-A-Car Agency. Hawaii Rent-A-Car Agency also does not request the organization to acknowledge its liability for possible damage to the station wagon while using it, provide insurance coverage or proof of such coverage, or to sign a collision damage waiver. Accordingly, Hawaii Rent-A-Car Agency has received no consideration and the rental motor vehicle surcharge tax does not apply.

Notes

Haw. Code R. § 18-251-1-04
[Eff 1/27/92] (Auth: HRS §§ 231-3(9), 251-15(b)) (Imp: HRS § 251-1) [Am 4/2/2016]

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