(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.
(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 percent; 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 percent if sold by the
manufacturer of the container or packaging material; or
(ii) One-half of one percent 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 percent.
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 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
percent.
(2) Special charge for container.
Nonreturnable containers and packaging materials take a rate of one-half of one
percent 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 percent 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 percent rate
as set forth in subparagraphs (A) or (B) shall be deemed to be sales taking the
four percent 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.
(d) Returnable containers.
(1) Sales of containers to licensed persons
whose customers receive title to the containers shall take the one-half of one
percent 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 percent 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 percent 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
percent, if sold for nonqualifying purposes.
(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 percent as provided in paragraph (1)(C)(i). The materials or
commodities sold for nonqualifying uses shall be reported at the rate of four
percent 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 percent.
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 percent. The applicable rate to the sale of the odor
controlling materials is four percent 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 percent
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 percent. However, the applicable tax rate on sales of these
same products for use in maintenance services is four percent.
(3) A seller may obtain a resale certificate
from the buyer. For purposes of resale certificates, section 18-237-13(b)(4)
applies.
