HAR §18-237-4. “Wholesaler”, “jobber”, defined

(a) Sales at wholesale defined. Pursuant to section 237-4, HRS, and taking into consideration sections 237-13(3)(C) and 237-13(3)(D), HRS, only the following are sales at wholesale: (1) Sales to a licensed retail merchant, jobber or other licensed seller for purposes of resale; (2) Sales to a licensed manufacturer of materials or commodities which are to be incorporated by such manufacturer into a finished or saleable product (including the container or package in which the product is contained) during the course of its preservation, manufacture or processing, including preparation for market, and which will remain in such finished or saleable product in such form as to be perceptible to the senses, which finished or saleable product is to be sold and not otherwise used by such manufacturer; (3) Sales to a licensed agricultural or aquacultural producer or agricultural or aquacultural cooperative association of materials or commodities which are to be incorporated, used, or applied by the producer or by the cooperative association for the purpose of producing or raising a finished or saleable product or crop which is to be sold and not otherwise used by the producer or cooperative association, including specifically materials or commodities incorporated, used, or applied as essential to the planting, growth, nurturing, and production of agricultural or aquacultural products or crops which are sold by the producer or by the cooperative association; (4) Sales to a licensed contractor of materials or commodities which are to be incorporated by the contractor into the finished work or project required by the contract and which will remain in the finished work or project in a form which is perceptible to the senses, unless governed by the election provided for by section 237-13(3)(C), HRS; and sales to a purchaser holding a license under the general excise tax law, of materials or commodities which are to be incorporated by the purchaser into a building, structure or other improvements on land held by the purchaser and which will remain in such improvement in a form which is perceptible to the senses, provided that the improvements are made with the intention of selling or otherwise disposing of them and that the property is afterward sold or otherwise disposed of in such manner as to render the purchaser of the materials or commodities, so incorporated, liable to the same tax as if engaged in the business of contracting; (5) Sales to a licensed producer, or to a cooperative association described in section 237-23(9), HRS, for sale to such producer, or to a licensed person operating a feed lot, of: (A) Poultry or animal feed, hatching eggs, semen, replacement stock, breeding services for the purpose of raising or producing animal or poultry products for disposition as described in section 237-5, HRS, or to be incorporated in a manufactured product as described in paragraph (2), or for the purpose of breeding, hatching, milking, or egg laying other than for the customer’s own consumption of the meat, poultry, eggs, or milk so produced; (B) In the case of a feed lot operator: (i) Only the segregated cost of the feed furnished by the feed lot operator as part of his services to a licensed producer of poultry or animals to be butchered, or to a cooperative association described in section 237-23(1), HRS, of such licensed producers shall be deemed to be a sale at wholesale; and (ii) Any amount derived from the furnishing of feed lot services, other than the segregated cost of feed, shall be deemed taxable at the service business rate. HRS §237-2 HRS §237-3 HRS §237-4 237- 7 (Unofficial Compilation as of 12/31/2025) GENERAL EXCISE TAX LAW §18-237-4 (C) This paragraph shall not apply to the sale of feed for poultry or animals to be used for hauling, transportation, or sports purposes; (6) Sales to a licensed producer, or to a cooperative association described in section 237-23(9), HRS, for sale to such producer, of: (A) Seed for producing agricultural products to be sold or otherwise disposed of as described in section 237-5, HRS, or to be incorporated in a manufactured product as described in paragraph (2); or (B) Bait for catching fish (including the catching of bait for catching fish) which are to be sold or otherwise disposed of as described in section 237-5, HRS, or to be incorporated in a manufactured product as described in paragraph (2); (7) Sales to a licensed producer or to a cooperative association described in section 237-23(9), HRS, for sale to the producer, of: (A) Cartons and other containers, wrappers and sacks, and binders to be used for packaging eggs, vegetables, fruits and other agricultural products; or (B) Seedlings and cuttings for producing nursery plants; or (C) Chick containers; which are to be used as described in section 237-5, HRS, or to be incorporated in a manufactured product as described in paragraph (2); (8) Sales of tangible personal property to a licensed person engaged in the service business, provided that: (A) The property is not consumed or incidental to the performance of service; and (B) There is a sale of the article at the retail rate of four per cent; and (C) The resale of the article is separately charged or billed by the person rendering the service; and (9) Sales to a licensed leasing company which leases capital goods as a service to others. For this purpose, capital goods are goods which in the hands of a licensed leasing company has a depreciable life and which are to be used by the licensed leasing company for leasing to others for a consideration. The words “cooperative association” as used in paragraphs (5) to (7) mean a cooperative association incorporated under chapter 421 or under chapter 422, HRS, and which fully meet the requirements for tax exemption as specified in section 237-23(9), HRS. The words “agricultural producer” as used in paragraph (3) and section 237-5, HRS, mean a producer of plant crops, including floriculture, horticulture, viticulture (vineyards), timber, nut, coffee, sugar cane, pineapple, or other similar agricultural activity where the products or crops are sold, but shall not include any animal or poultry products or a person operating a golf course, a cemetery, a property management activity, or an agricultural research organization. The words “aquaculture producer” as used in paragraph (3) and section 237-5, HRS, mean a producer of aquatic plant and animal life for food or fiber within a controlled salt, brackish, or freshwater environment. (b) Subsection (c) and (d) relate to the tax rates applicable under the general excise tax law with respect to containers and packaging materials sold in the State. (c) Nonreturnable containers, packaging materials. (1) Sale to manufacturer for incorporation during preparation for market. (A) This paragraph applies to nonreturnable containers and packaging materials which are sold to a licensed manufacturer who incorporates the container or packaging material into a finished or saleable product during the course of its preservation, manufacturing, processing, or preparation for market, and which will remain in a form which is perceptible to the senses, which is to be sold and not otherwise used by the manufacturer. (B) When containers and packaging materials to which this subparagraph applies are sold to a person and for the purpose above stated, they take the rate of: (i) One-half of one per cent if sold by the manufacturer of the container or packaging material; or (ii) One-half of one per cent if sold by a wholesaler. Example 1: Taxpayer manufacturers cracker boxes, which taxpayer supplies to a cracker manufacturer. The boxes are used for packaging crackers, which are displayed and sold in packaged form. The rate applicable to the manufacture and sale of the boxes by the box manufacturer is one-half of one per cent. Example 2: Taxpayer imports from the mainland cardboard cartons which are sold to a brewery. The brewery takes the cartons to a printer who imprints the brewery’s name and §18-237-4 GENERAL EXCISE TAX LAW 237- 8 (Unofficial Compilation as of 12/31/2025) trade mark together with information as to the contents. The cartons are used by the brewery in putting cans of beer in case lots. This is done at the time of manufacture, and the beer is offered for sale by the case. The rate applicable to the taxpayer upon the sale of the cartons to the brewery is one-half of one per cent. (2) Special charge for container. Nonreturnable containers and packaging materials take a rate of one-half of one per cent when sold to a licensed retailer or other licensed seller, who adds a special charge on account of the type of container or packaging materials used for his merchandise, for example, a special charge for a gift box. (3) Four per cent rate, when applicable. All sales to unlicensed persons, and all other sales of containers and packaging materials that are not shown to be covered by the one-half of one per cent rate as set forth in subparagraphs (A) or (B) shall be deemed to be sales taking the four per cent rate. The fact that the purchaser is engaged in making sales and uses the purchased containers or packaging materials for the purpose of delivering the goods sold or otherwise completing sales transactions shall not cause a lesser rate to apply. Example 3: Taxpayer imports from the mainland boxes and wrapping paper, which are used by retail stores at the time of sale of their merchandise to box or wrap purchases made by customers. The four per cent rate applies to the sale of the boxes and wrapping paper to the retail stores. (d) Returnable containers. (1) Sales of containers to licensed persons whose customers receive title to the containers shall take the one-half of one per cent rate when the instance would be covered by subsection (c)(1) or (2), except for the fact that the containers are returnable by these customers. The circumstance that the customers may return the containers and receive a credit or refund for doing so does not necessarily show that title does not pass to the customers. (2) However, in some instances involving returnable containers title to the containers does not pass to the customers of the purchaser and accordingly the containers are not “resold” by the purchaser; in such cases the sale of the containers to the purchaser so using them takes the four per cent rate. For example, the name of the purchaser may appear on the containers in such a way as to show that there is no intention on his part to pass title to the containers, and accordingly the containers are not “resold” by the purchaser and the sale of the containers to this purchaser takes the four per cent rate. Whether paragraph (1) or (2) applies depends upon all the facts, which shall be submitted for ruling. (e) Agricultural or aquacultural materials or commodities sold in the State. This subsection relates to the tax rates applicable under the general excise tax law with respect to agricultural and aquacultural materials or commodities sold in the State. (1) This paragraph applies to the sale of materials or commodities incorporated, used, or applied as essential to the planting, growth, nurturing, and production of agricultural or aquacultural commodities to a licensed agricultural or aquacultural producer or cooperative association for use by the person in the production, processing, and preparation of agricultural or aquacultural products or crops for sale. (A) Some examples of sales of materials or commodities representing qualifying uses include, but are not limited to: antibiotics (for aquaculture and not for cattle and animals), expendable drip irrigation tubings, fertilizers, fumigants, fungicides, growth regulators, herbicides, packaging supplies, polyethylene mulch films, pesticides, processing materials, roofing papers (used in field furrows), soil amendments, surfactants (wetting agents), water purchased for irrigation (from nonpublic utility companies). Pesticides shall be defined by section 149A-2(26), HRS. (B) Some examples of sales of materials or commodities representing nonqualifying uses include, but are not limited to: construction materials and supplies, equipment and repair parts, filtering devices, harvesting equipment, irrigation systems, janitorial supplies, office supplies, odor control devices and materials, PVC pipes, all rendition of services. (C) When materials or commodities to which this paragraph applies are sold to a person and for the purposes above stated, such sale takes the rate of: (i) One-half of one percent, if sold for qualifying purposes, or (ii) Four per cent, if sold for nonqualifying purposes. 237- 9 (Unofficial Compilation as of 12/31/2025) GENERAL EXCISE TAX LAW §18-237-4-01.01 (2) In the event materials or commodities are both qualifying and nonqualifying uses, an allocation shall be made in order that only the sales made for qualifying uses will be reported at the rate of one-half of one per cent as provided in paragraph (1)(C)(i). The materials or commodities sold for nonqualifying uses shall be reported at the rate of four per cent as provided in paragraph (1)(C)(ii). Example 1: Taxpayer sells materials and commodities to a licensed aquacultural producer engaged in research activities in addition to taxpayer’s usual business of producing aquacultural products for market. The materials or commodities used in the research activities represent nonqualifying uses; therefore, the applicable rate imposed upon the sale of such materials and commodities is four per cent. Example 2: Taxpayer sells certain materials and commodities to a licensed agricultural producer, including a soil amendment in order to obtain optimum crop production. It is found, however, that the soil amendment releases certain offensive odors creating a serious pollution problem for the nearby community. To combat this situation, the agricultural producer adds odor controlling materials to the soil amendment which do not adversely affect crop production. Insamuch as the soil amendment is deemed essential to the production of agricultural commodities, the applicable rate of such sale is one-half of one per cent. The applicable rate to the sale of the odor controlling materials is four per cent since they are not considered essential to the production of agricultural commodities. Example 3: After harvesting, a sugar plantation treats the soil with a substance which controls odors and which also acts as a fungicide. Without this fungicide treatment, subsequent yields would be adversely affected. In this situation, the applicable tax rate on the sale of the odor controlling fungicide to the plantation is one-half of one per cent because of its dual use as a fungicide. Example 4: A landscape contractor maintains its own nursery. The plants grown in the nursery are used in contracting activities or may be sold apart from any landscaping contract. The contractor also provides grounds maintenance services for various clients. The applicable tax rate on sales to this contractor of fertilizers and pesticides for nursery use is one-half of one per cent. However, the applicable tax rate on sales of these same products for use in maintenance services is four per cent. (3) A seller may obtain a resale certificate from the buyer. For purposes of resale certificates, section 18-237-13(b)(4) applies. [Eff 2/16/82; am 4/25/83] (Auth: HRS §§231-3(9), 237-8) (Imp: HRS §§237-4, 237-5) §18-237-4-01.01 Sales to eating or drinking retailers. (a) As used in this section: “Critical element” means any nonreturnable food or beverage container which is necessary to contain food or beverage for delivery by an eating or drinking retailer. “Delivery” means the transfer of food or beverage by an eating or drinking retailer to a purchaser for take-out purchases, home transfer, transfer within a traditional service and fast-food restaurant, or any combination thereof. “Eating or drinking retailer” means a licensed retailer engaged in the temporary or permanent activity of selling food or beverage at retail. Eating or drinking retailer includes traditional service and fast-food restaurants, carnivals, fairs, hot dog carts, lunch wagons, grocery or department stores engaging in the sale of ready-to-eat foods, bakeries, concession stands, or the like. “Nonreturnable food or beverage container” means any container, wrapper, or packaging, including any attached or unattached lid or cover which is (1) usually discarded after its initial use, and (2) whose generally known and most common use is to contain food or beverage for delivery. (b) If any tangible personal property is resold by an eating or drinking retailer for a separate charge, then section 18-237-4(a)(1) shall control the determination of the tax rate. (c) Sales to an eating or drinking retailer of any tangible personal property which is a critical element and which is used to contain food or beverage sold at retail shall be taxable as sales at wholesale. Example 1: Taxpayer sells cardboard pizza boxes to a pizza restaurant. The pizza restaurant prepares and serves pizza to restaurant customers and also prepares pizza for take-out customers. The pizza box is a critical element. The pizza box is a nonreturnable food container; it is a HRS §237-4(11) & (12) §18-237-4-01.01 GENERAL EXCISE TAX LAW 237- 10 (Unofficial Compilation as of 12/31/2025) container which is usually discarded after its initial use and whose generally known and most common use is to contain pizza for delivery. The pizza box also is necessary to contain the pizza for delivery by the restaurant. Lastly, the pizza box is used to contain the pizza sold at retail. Sales of the pizza boxes, therefore, are taxable as sales at wholesale. Example 2: Taxpayer sells white paper boxes and styrofoam containers to a Chinese restaurant. The restaurant prepares and serves food to restaurant customers and also prepares food for take-out customers. White paper boxes and styrofoam containers are critical elements. Both white paper boxes and styrofoam containers are nonreturnable food containers; they are containers which are usually discarded after their initial use and whose generally known and most common uses are to contain food for delivery. White paper boxes and styrofoam containers also are necessary to contain the food for delivery by the restaurant. Lastly, the white paper boxes and styrofoam containers are used to contain the food sold at retail. Sales of the white paper boxes and styrofoam containers, therefore, are taxable as sales at wholesale. Example 3: Taxpayer sells cups and cup lids to a lemonade stand. Cups and cup lids are critical elements. Cups and cup lids form nonreturnable beverage containers; cups and cup lids form containers which are usually discarded after their initial use and whose generally known and most common uses are to contain beverages for delivery. Cups and cup lids also are necessary to contain beverages for delivery by the lemonade stand. Lastly, the cups and cup lids are used to contain the lemonade sold at retail. Sales of the cups and cup lids, therefore, are taxable at wholesale. Example 4: Taxpayer sells paper wrappers to a lunch wagon operator. The lunch wagon operator prepares hot dogs and sandwiches for sale; they are wrapped in the paper wrappers for delivery of the food to the purchasers. Paper wrappers are critical elements. Paper wrappers are nonreturnable food containers; they are wrappers which are usually discarded after their initial use and whose generally known and most common uses are to contain food for delivery. Paper wrappers also are necessary to contain the hot dogs and sandwiches for delivery by the lunch wagon operator. Lastly, the paper wrappers are used to contain the hot dogs and sandwiches sold at retail. Sales of the wrappers, therefore, are taxable as sales at wholesale. Example 5: Taxpayer sells plastic wrap, butcher paper, and foam packing trays to a meat market. The market packages meat in the plastic wrap, butcher paper, and foam packing trays for sale in the market. Plastic wrap, butcher paper, and foam packing trays are critical elements. Plastic wrap, butcher paper, and foam packing trays are nonreturnable food containers; they are packaging materials and containers which are usually discarded after their initial use and their generally known and most common uses are to contain food for delivery. Plastic wrap, butcher paper, and foam packing trays also are necessary to contain the meat for delivery by the meat market. Lastly, the plastic wrap, butcher paper, and foam packing trays are used to contain the meat sold at retail. Sales of the plastic wrap, butcher paper, and foam packing trays, therefore, are taxable as sales at wholesale. Example 6: Taxpayer sells foil-lined bags to a full-service restaurant. The restaurant allows customers to take home the leftovers from their restaurant meal; leftovers are packed in a foil-lined bag. The foil-lined bags are critical elements. The foil-lined bags are nonreturnable food containers; they are packages which are usually discarded after their initial use and whose generally known and most common uses are to contain food for delivery. The foil-lined bags also are necessary to contain the food for delivery by the restaurant. Lastly, the foil-lined bags are used to contain the food sold at retail. Sales of the foil-lined bags, therefore, are taxable as sales at wholesale. Example 7: Taxpayer sells foil-lined hot dog bags and waxed paper-lined popcorn bags. Hot dogs are cooked and then placed in the hot dog bags for sale at the theater. The theater also pops 237- 11 (Unofficial Compilation as of 12/31/2025) GENERAL EXCISE TAX LAW §18-237-4-01.01 popcorn; the theater then packages the popcorn into individual portions in the waxed paper-lined popcorn bags. Foil-lined hot dog bags and waxed paper-lined popcorn bags are critical elements. Foil- lined hot dog bags and waxed paper-lined popcorn bags are nonreturnable food containers; they are packages which are usually discarded after their initial use and whose generally known and most common uses are to contain food for delivery. Foil-lined hot dog bags and waxed paper-lined popcorn bags also are necessary to contain hot dogs and popcorn for delivery by the theater. Lastly, the foil-lined and waxed paper-lined bags are used to contain the hot dogs and popcorn sold at retail. Sales of the foil-lined hot dog bags and waxed paper-lined popcorn bags, therefore, are taxable as sales at wholesale. (d) The tax rate on the sale of any tangible personal property which is not a critical element or which is not used to contain food or beverage sold at retail shall be determined under section 237-4, HRS, and section 18-237-4. Example 1: Taxpayer sells paper bags to a carnival. The carnival packages malasadas for sale in paper bags. These paper bags are not critical elements. As defined in this section, a paper bag is not a nonreturnable food or beverage container; although a paper bag is usually discarded after its initial use, the generally known and most common use of a paper bag is not to contain food or beverage. Rather, the generally known and most common use of a paper bag is to aid the carrying of many items. Consequently, although the paper bags are used by the carnival to contain malasadas sold at retail, the paper bags are not critical elements as defined in this section. The sale of the paper bags, therefore, is taxed at retail as determined under section 237-4, HRS, and section 18-237-4. Example 2: Taxpayer sells plastic drinking cups to a supermarket which sells groceries and ready-to-eat foods. The supermarket sells some of the cups at retail; the other cups are used to contain beverages sold at a snack bar located in the supermarket. The cups sold to the snack bar located in the supermarket are critical elements. The cups sold to the snack bar are nonreturnable beverage containers; these cups are containers which are usually discarded after their initial use and whose generally known and most common uses are to contain beverages for delivery. These cups also are necessary to contain beverages for delivery by the supermarket. Lastly, the cups are used to contain the beverages sold at retail. Sales of cups used to contain beverages sold by the snack bar, therefore, are taxable as sales at wholesale. The rest of the cups sold to the supermarket also are critical elements but are not used to contain beverages for sale at retail. The sale of cups to the supermarket for resale, therefore, is taxed at wholesale as determined under section 237-4, HRS, and section 18-237-4. Example 3: Taxpayer sells napkins, spoons, and paper ice cream cups to an ice cream parlor. Napkins are wrapped around ice cream cones and also are provided for sanitary use by purchasers. Napkins and spoons are not critical elements. As defined in this section, napkins and spoons are not nonreturnable food containers; although napkins and spoons are usually discarded after their initial use, the generally known and most common uses of napkins and spoons are not to contain food. Rather, the generally known and most common use of a napkin is for sanitary purposes, and the generally known and most common use of a spoon is to aid consumption. Consequently, because the napkins and spoons are not nonreturnable food or beverage containers, they are not critical elements as defined in this section. The sale of napkins and spoons to the ice cream parlor, therefore, is taxed at retail as determined under section 237-4, HRS, and section 18-237-4. The paper ice cream cups, however, are critical elements. The paper ice cream cups are nonreturnable food containers; they are containers which are usually discarded after their initial use and whose generally known and most common uses are to contain ice cream for delivery. The paper ice cream cups also are necessary to contain the ice cream for delivery by the ice cream parlor. Lastly, the paper ice cream cups are used to contain ice cream sold at retail. Sales of the paper ice cream cups, therefore, are taxable as sales at wholesale. Example 4: Taxpayer sells white paper boxes and butcher paper to a carnival whose activities include engaging in the sale of food and beverage at retail. Instead of using the boxes and butcher paper to contain food for delivery, the carnival uses the butcher paper to decorate its game and scrip booths and the boxes to contain t-shirts sold at retail. §18-237-4-01.01 GENERAL EXCISE TAX LAW 237- 12 (Unofficial Compilation as of 12/31/2025) Even though the boxes and butcher paper are critical elements (i.e., the boxes and butcher paper are nonreturnable food containers and packaging; they are containers and packaging which are usually discarded after their initial use and whose generally known and most common uses are to contain food for delivery; and the boxes and butcher paper also are necessary to contain food for delivery by an eating or drinking retailer), they are not used to contain food for sale at retail. Rather, the boxes and butcher paper are used as decorations and gift wrapping for the carnival. The sales of the white paper boxes and butcher paper to the carnival, therefore, are taxed at retail as determined under section 237-4, HRS, and section 18-237-4. Example 5: Taxpayer sells 10,000 promotional plastic cups and cup lids to a snack bar and deli located in the XYZ Store, which is a clothing and general merchandise retailer. The snack bar and deli use 1,000 of the promotional cups and cup lids to serve beverages. The other 9,000 cups and cup lids, however, are used by the XYZ Store as gift wrapping for the “XYZ Store” promotional t-shirts. “XYZ Store” t-shirts are sold gift wrapped in the cups and cup lids. The 1,000 cups and cup lids used to contain beverages are critical elements. Cups and cup lids form nonreturnable beverage containers; they are containers which are usually discarded after their initial use and whose generally known and most common uses are to contain beverages for delivery. The cups and cup lids also are necessary to contain beverages for delivery by the XYZ Store. Lastly, the cups and cup lids are used to contain beverages sold at retail. Sale of the 1,000 cups and cup lids to contain the beverages sold by the snack bar and deli, therefore, is taxable as a sale at wholesale. The other 9,000 cups and cup lids also are critical elements but are not used to contain beverages for sale at retail by XYZ Store. Rather, the cups and cup lids are used as gift wrapping. The sale of the 9,000 cups and cup lids which are used as gift wrapping, therefore, are taxed at retail as determined under section 237-4, HRS, and section 18-237-4. (e) Except as provided in this section, the tax rate on the sale of food or beverage to an eating or drinking retailer shall be determined under section 237-4, HRS, and section 18-237-4. (f) Sales of food or beverage to an eating or drinking retailer which cooks, combines, or prepares the food or beverage for sale at retail shall be taxable as sales at wholesale. Example: Taxpayer sells uncooked hamburger patties and buns to a hamburger stand. The hamburger stand cooks and prepares hamburgers for sale at retail. Sales of the hamburger patties and buns to the hamburger stand, therefore, are taxable as sales at wholesale. (1) Sales of bulk containers of condiments to an eating or drinking retailer which cooks, combines, or prepares the bulk condiments for sale at retail shall be taxable as sales at wholesale. Example: Taxpayer sells bulk containers of ketchup, mustard, salad dressing, and tartar sauce to an eating or drinking retailer. The eating or drinking retailer uses these condiments in the cooking, combination, or preparation of food for sale at retail. Sales of these bulk containers of condiments to the eating or drinking retailer, therefore, are taxable as sales at wholesale. (2) Sales of prepackaged single-serving packets of condiments to an eating or drinking retailer which prepares food or beverage for sale at retail shall be taxable as sales at retail; provided that if any prepackaged, single-serving condiment packets are resold by an eating or drinking retailer for a separate charge, then section 18-237-4(a)(1) shall control the determination of the tax rate. Prepackaged single-serving condiment packets include salt, pepper, ketchup, mustard, relish, croutons, bacon bits, sugar, sugar substitutes, cream, cream substitutes, shoyu, spices, salad dressings, sauces, pancake syrup, butter, butter substitutes, or the like. Example: Taxpayer sells lettuce, other vegetables, and prepackaged single-serving condiment packets of croutons and salad dressings to a grocery store. The grocery store prepares the lettuce and other vegetables into salads for sale at retail to purchasers. There is no separate charge for the prepackaged single-serving condiment packets of croutons and salad dressings which accompany the salads. Sales of lettuce and other vegetables to the grocery store are taxable as sales at wholesale; 237- 13 (Unofficial Compilation as of 12/31/2025) GENERAL EXCISE TAX LAW §18-237-8.6-05 the grocery store combines these items into salads for sale at retail to purchasers. Conversely, sales of the prepackaged single-serving condiment packets of croutons and salad dressings to the grocery store are taxable as sales at retail; there is no separate charge for the condiment packets. [Eff 12/30/93] (Auth: HRS §§231-3(9), 237-8) (Imp: HRS §237-4) §18-237-5 to §18-237-8 (Reserved) §18-237-8.6-01 Definitions. As used in sections 18-237- 8.6-01 to 18-237-8.6-10, unless the context otherwise requires: “Control” means to exercise restraining or directing influence over. “Hawaii district” means the taxation district for the county of Hawaii. “Intangible property” means, but is not limited to, franchises, patent, copyright, formula, process, design, pattern, know how, format, or other similar items. “Kauai district” means the taxation district for the county of Kauai. “Maui district” means the taxation district for the counties of Maui and Kalawao, which includes the islands of Maui, Molokai, and Lanai. “Oahu district” means the taxation district for the city and county of Honolulu. “Tangible personal property” is generally property that may be touched or felt. “Taxation district” means the Kauai district, Hawaii district, Maui district, or Oahu district, as those districts are defined in this section. [Eff 12/07/2006; am 3/17/2018] (Auth: HRS §§231-3(9), 237- 8) (Imp: HRS §237-8.6) §18-237-8.6-02 Allocation of gross income and gross proceeds from sales of tangible personal property. Except as provided in this section, the gross income and gross proceeds of sale derived from a taxpayer’s sale of tangible personal property shall be allocated to the taxation district where the property is delivered, regardless of where the title to the property passes. Example 1: Taxpayer, a retailer located in the Oahu district, receives an order for products from Purchaser. Taxpayer accepts the order and delivers the products to the Maui district. Taxpayer shall allocate the gross income from the sale to the Maui district, where the products were delivered. Example 2: Taxpayer, a retailer located in the Maui district, sells products to Purchaser located in the Oahu district. Pursuant to Purchaser’s instructions, Taxpayer directs Taxpayer’s product manufacturer, who is located in the Kauai district, to deliver the products to Purchaser’s office in the Maui district. Taxpayer shall allocate the gross income from the sale to the Maui district, where the products were delivered. Example 3: Retailer, located out of state, sells and delivers products to Purchaser in the Oahu district. Retailer shall allocate the gross income from the sale to the Oahu district, where the products were delivered. [Eff 12/07/2006; am 3/17/2018] (Auth: HRS §§231-3(9), 237-8) (Imp: HRS §237-8.6) §18-237-8.6-03 Allocation of gross income from contracting and services. (a) Gross income from contracting or services performed by a taxpayer engaged in a service business shall be allocated to the taxation district where the services are used or consumed, as provided in sections 18-237-29.53-03 to 18-237-29.53-13. (b) If services are used or consumed in more than one taxation district, gross income shall be allocated using any reasonable method; provided that the method is consistently used by the taxpayer and supported by verifiable data that reasonably quantifies the proportionate benefit received by each taxation district. [Eff 12/07/2006; am 3/17/2018] (Auth: HRS §§231-3(9), 237-8) (Imp: HRS §237-8.6) §18-237-8.6-04 Repealed. [R 3/17/2018] §18-237-8.6-05 Allocation of gross income from the rental, lease, or license of tangible and intangible personal property. (a) Except as provided in this section, gross income from the rental, lease, or license of tangible and intangible personal property shall be allocated to the taxation district where the property is used. Example 1: Taxpayer is engaged in the business of renting motor vehicles in each of the four taxation districts. Taxpayer rents a vehicle to a customer in the Maui district. Taxpayer shall allocate the gross income received from the rental to the Maui district, where the vehicle is used. HRS §237-8.6 HRS §237-8.6 HRS §237-8.6 HRS §237-8.6 HRS §237-8.6 §18-237-8.6-06 GENERAL EXCISE TAX LAW 237- 14 (Unofficial Compilation as of 12/31/2025) Example 2: Taxpayer, located in the Oahu district, is engaged in the business of renting equipment. Taxpayer rents equipment to XYZ, located in the Maui district, for a job in the Kauai district. Taxpayer shall allocate the gross income from this rental to the Kauai district, where the property is used. Example 3: Taxpayer, located in the Oahu district, wrote and copyrighted a song. A musician pays Taxpayer a royalty to perform that song for profit in a hotel in the Maui district. Taxpayer shall allocate the gross income from the license of the copyright to the Maui district where the property is used. (b) Where a taxpayer rents or leases tangible personal property or licenses or receives a royalty from intangible personal property that is used in more than one taxation district, gross income shall be allocated using any reasonable method; provided that the method is consistently used by the taxpayer and supported by verifiable data that reasonably quantifies the proportionate benefit received by each taxation district. This rule also applies to property that is constantly in transit between taxation districts, such as barges, containers, and aircrafts without home ports or bases. Example 1: Taxpayer rents equipment to XYZ to be used in the Maui district and the Oahu district. The equipment will be used in the Maui district for six months and in the Oahu district for six months. Taxpayer shall allocate fifty per cent of the gross income from the rental of the equipment to the Maui district and fifty per cent to the Oahu district. [Eff 12/07/2006; am 3/17/2018] (Auth: HRS §§231-3(9), 237-8) (Imp: HRS §237-8.6) §18-237-8.6-06 Allocation of gross income from the rental or lease of real property. Gross income from a taxpayer’s rental or lease of real property in the State shall be allocated to the taxation district where the real property is located. Example 1: Taxpayer rents condominium units located in each of the four taxation districts. Taxpayer shall allocate the gross income from the rental of each unit to the taxation district where the condominium unit is located. [Eff 12/07/2006; am 3/17/2018] (Auth: HRS §§231- 3(9), 237-8) (Imp: HRS §237-8.6) §18-237-8.6-07 Repealed. [R 3/17/2018] §18-237-8.6-08 Allocation of gross income from interest. (a) The gross income from a taxpayer’s investment interest shall be allocated to the taxation district where the investment is controlled. Alternatively, the taxpayer may allocate the gross income by using any reasonable method; provided that the method is consistently used by the taxpayer and is supported by verifiable data that reasonably reflects the benefit received by the taxation district. Example 1: Taxpayer has retail locations in all taxation districts and has corporate offices located in the Oahu district. Taxpayer has a central cash management account controlled by the corporate office located in the Oahu district that places the gross receipts from all retail locations into one interest bearing bank account. Taxpayer shall allocate the interest received from this bank account to the Oahu district because the account is controlled by the corporate office located in the Oahu district. Example 2: Assume the same facts as in example 1, except that a separate bank account is created for the Maui district retail locations. The money deposited into that bank account is used for improvements to the Maui district stores and controlled by the Maui district retail locations. Interest on this bank account shall be allocated to the Maui district. (b) When interest is earned from the sale of tangible personal property on a deferred or installment payment plan, the interest shall be allocated to the taxation district where the tangible personal property is delivered. Alternatively, the taxpayer may allocate the gross income by using any reasonable method; provided that the method is consistently used by the taxpayer and supported by verifiable data that reasonably reflects the benefit received by the taxation district. Example 1: Taxpayer, located in the Hawaii district, sells equipment to Purchaser, located in the Kauai district, on an installment payment plan. Taxpayer delivers the equipment to Purchaser HRS §237-8.6 HRS §237-8.6 HRS §237-8.6 237- 15 (Unofficial Compilation as of 12/31/2025) GENERAL EXCISE TAX LAW §18-237-8.6-10 in the Kauai district. Every month for twelve months, Taxpayer receives a payment from Purchaser, which includes principal and interest. Taxpayer shall allocate the interest received from each payment to the Kauai district. (c) When interest is earned from the sale of real property on a deferred payment plan, the gross income from the interest shall be allocated to the taxation district where the real property is located. Example 1: Taxpayer sells real estate located in the Oahu district pursuant to an agreement of sale, which provides for deferred payments of the sales price and an interest charge. Taxpayer shall allocate the interest received to the Oahu district because the real estate that is the subject of the agreement of sale is located in the Oahu district. [Eff 12/07/2006; am 3/17/2018] (Auth: HRS §§231-3(9), 237-8) (Imp: HRS §237-8.6) §18-237-8.6-09 Allocation of gross income of theaters, amusements, etc. The gross income from the business of operating a theater, opera house, moving picture show, vaudeville, amusement park, dance hall, skating rink, or any other place where amusements are offered to the public shall be allocated to the taxation district where the event takes place. Alternatively, the taxpayer may allocate the gross income by using any reasonable method; provided that the method is consistently used by the taxpayer and supported by verifiable data that reasonably reflects the benefit received by the taxation district. [Eff 12/07/2006; am 3/17/2018] (Auth: HRS §§231­ 3(9), 237-8) (Imp: HRS §237-8.6) §18-237-8.6-10 All others. If sections 18-237-8.6-02 to 18-237-8.6-09 do not apply, gross income shall be allocated to a taxation district based upon the rules for allocating gross income which are the most relevant to the taxpayer’s particular business activity. Alternatively, the taxpayer may allocate the gross income by using any reasonable method; provided that the method is consistently used by the taxpayer and supported by verifiable data that reasonably reflects the benefit received by the taxation district. [Eff 12/07/2006; am 3/17/2018] (Auth: HRS §§231-3(9), 237-8) (Imp: HRS §237-8.6) HRS §237-8.6 HRS §237-8.6 §18-237-9 to §18-237-12 GENERAL EXCISE TAX LAW 237- 16 (Unofficial Compilation as of 12/31/2025) SUBCHAPTER 2 LICENSES; TAX; EXEMPTIONS §18-237-9 to §18-237-12 (Reserved)