Hawaii Administrative Rules
Title 18 - DEPARTMENT OF TAXATION
Chapter 235 - INCOME TAX LAW
Subchapter 1 - GENERAL PROVISIONS
Section 18-235-4-03 - Nonresidents taxable on Hawaii income

Universal Citation: HI Admin Rules 18-235-4-03

Current through August, 2024

(a) A nonresident, as defined in section 235-1, HRS, is taxable on Hawaii source income and is not taxable on out-of-state income. A nonresident is not allowed a credit for taxes paid to another state under section 235-55, HRS.

(b) A nonresident shall determine Hawaii source income by allocation and apportionment under the Uniform Division of Income for Tax Purposes Act, sections 235-21 to 235-39, HRS, if:

(1) The nonresident derives income from business activity both within and without the State,

(2) The nonresident's business activity is taxable in both this State and another jurisdiction, and

(3) The income is not derived from the rendering of purely personal services.

Otherwise, a nonresident shall determine Hawaii source income by allocation and separate accounting pursuant to section 235-5, HRS, and section 18-235-5-02.

(c) A nonresident, foreign corporation, or other nonresident taxpayer:

(1) Which acts as a business entity in more than one state;

(2) Whose only activities within the State, either alone or as part of a unitary group, consist of sales and do not include:
(A) Owning or renting real estate or tangible personal property, or

(B) Personal services; and

(3) Whose annual gross sales in or into this State during the tax year are not in excess of $100,000, may elect to report and pay a tax of 0.5 percent of such gross sales in lieu of the tax otherwise imposed by chapter 235, HRS. An election under this subsection shall constitute the election described in article III, paragraph 2 of the Multistate Tax Compact, chapter 255, HRS, and provided in section 235-51(e) or 235-71(e), HRS. The election may be made by timely filing the form prescribed by the department for this purpose. The election shall be made not later than the last day prescribed by law (including extensions of time) for filing the net income tax return that otherwise would be filed for the tax year.

(d) If a nonresident files a joint return with a spouse who is a resident for the full taxable year, the tax is imposed on aggregate income for the full taxable year without regard to source. A nonresident spouse filing a joint return does not thereby become a resident for purposes of chapter 235, HRS.

(e) This section shall apply to individuals described in section 3 of Act 60, SLH 1976, namely those who have taken up residence in the State:

(1) after attaining the age of sixty-five years, and

(2) before July 1, 1976. For those individuals, subsection (c) shall not apply, and no credit for tax paid to another state under section 235-55, HRS, shall be allowed. Any individual may waive the benefits of section 3 of Act 60, SLH 1976, by filing a written election with the department. This subsection shall not apply to any individual who has made such a waiver.

(f) For rules relating to change of residence during the taxable year, see section 18-235-4-04.

(g) For rules used to determine the source of income, see section 18-235-4-08.

(h) For deductions of a nonresident, and rules regarding income from alimony or separate maintenance payments, see section 18-235-5-03.

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