(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.
