Hawaii Administrative Rules
Title 18 - DEPARTMENT OF TAXATION
Chapter 237 - GENERAL EXCISE TAX LAW
Subchapter 2 - LICENSES; TAX; EXEMPTIONS
Section 18-237-13-02 - Tax on business of selling tangible personal property; producing

Universal Citation: HI Admin Rules 18-237-13-02

Current through November, 2023

(a) Recapping tires or selling tangible personal property for use in recapping tires.

(1) Sales by recapper. This paragraph applies to a person who purchases used tires or accepts used tires as trade-ins and subsequently recaps the same for the person's own stock for sale. When tires covered by this paragraph are sold, the sales take the rate of:
(A) One-half of one percent if made to another person who purchases the tires for purposes of resale; and

(B) Four percent if made for consumption or use by the purchaser and not for resale.

Example 1: A tire recapper (taxpayer R) sells tires from stock to a service station operator (taxpayer S) who purchases the tires for purposes of resale. Taxpayer R is subject to the general excise tax at the rate of one-half of one percent on the amount received from taxpayer S.

Example 2: A tire recapper (taxpayer R) sells tires from stock to a customer who installs the tires on the customer's family automobile. Taxpayer R is subject to the general excise tax at the rate of four percent on the amount received from the customer.

(2) Sales by purchaser of recapped tires. This paragraph applies to the gross income of a person who purchases recapped tires for purposes of resale. When tires covered by this paragraph are sold, such sales take the rate of:
(A) One-half of one percent if made to another person who purchases the tires for purposes of resale; and

(B) Four percent if made for consumption or use by the purchaser and not for resale.

(3) Sales of tangible personal property for use in tire recapping. This paragraph applies to a person who sells tangible personal property for use in tire recapping. When personal property covered by this paragraph is sold to a person using or consuming the personal property in tire recapping, such sales take the rate of:
(A) Four percent if made to a tire recapper whose gross income is taxable at the rates stated in section 18-237-13-06.11; and

(B) One-half of one percent if made to a tire recapper whose gross income is taxable at the rates stated in paragraph (1).

(b) Furnishing or use of trading stamps and similar devices. See section 18-237-13-10.

(c) Containers and packaging materials. See section 18-237-4(b).

(d) Resale certificates and sales at wholesale. This subsection sets forth the application of section 237-13(2)(F), HRS.

(1) Scope. A seller, in proper cases, may take from the purchaser of tangible personal property a certificate, in the form the director prescribes, certifying that the sale is a sale at wholesale. This subsection sets forth the effect as to resale certificates; defines "sales at wholesale"; sets forth the duties of sellers and purchasers in determining whether a sale is at wholesale; and prescribes the form of the certificate referred to in this subsection and in the administration and enforcement of these rules as a "resale certificate".

(2) Effect of rules as to resale certificates.
(A) A purchaser who furnishes a resale certificate in one of the prescribed general forms to a seller who accepts the certificate, thereby makes the certificate applicable to each sale of tangible personal property by the seller to that purchaser until the certificate is revoked by notice in writing, except those orders as to which it is specified in writing that the certificate does not apply. A special form of resale certificate is prescribed for use by sellers, at their option, for certain sales to purchasers who are in the contracting business, or who are subject to taxation as if so engaged. A purchaser who furnishes a resale certificate thereby makes the certificate applicable to each sale of materials or commodities made by the seller to that purchaser in connection with the particular work or project identified by this special form of resale certificate until the certificate is revoked by notice in writing, except those orders as to which it is specified by notice in writing that the certificate does not apply.

(B) A purchaser, by giving a resale certificate in any of the prescribed forms to a seller who accepts the certificate, certifies that unless the purchaser gives notice in writing, which either specifies that the certificate does not apply to a particular order or revokes the certificate altogether, the purchaser will upon demand of the seller pay to the seller the amount of the additional tax which by reason thereof is imposed upon the seller in the event any sale of tangible personal property by the seller to the purchaser (or in the case of a resale certificate in the special form, any sale made in connection with the particular work or project identified by the special form) is not in fact a "sale at wholesale," as defined by section 18-237-4, or is not a sale at wholesale to the extent stated in the resale certificate, as the case may be.

(C) If no resale certificate is given, or if there is a certificate but not in the proper form, or if the certificate is made inapplicable to a specific sale by a notice in writing, or if the certificate is revoked, there is a presumption that the sales which, in whole or in part, are not covered by an applicable certificate in the proper form, are not at wholesale. However, this presumption does not apply if the seller is one having a business which consists exclusively of sales at wholesale, as defined.

(D) The additional amount which the seller may require the purchaser to pay pursuant to subparagraph (B), is illustrated by the following examples:

Example 1: Seller manufactures animal feed as a by-product. On a sale as to which there is an applicable resale certificate, seller's price is $100. Tax is reported and remitted by the seller in the amount of $.50, at the one-half of one percent manufacturing rate. However, the sale in fact is not at "wholesale" because the feed is used by the purchaser for feeding saddle animals. Seller is assessed at the four percent rate applicable to sales other than at wholesale. The purchaser is liable to pay the seller $4.

Example 2: The facts are the same except that the seller is a producer of agricultural products, which are the subject of the sale. The amount which the purchaser is liable to pay the seller is $4.

Example 3: The sale is of animal feed brought in from the mainland. On a sale where there is an applicable resale certificate, seller's price is $100. Tax is reported and remitted by the seller in the amount of $.50, at the one-half of one percent wholesale rate. However, the sale in fact is not at "wholesale" because the feed is used by the purchaser for feeding saddle animals. Seller is assessed at the four percent rate applicable to sales other than at wholesale. The purchaser is liable to pay the seller $4.

Example 4: The sale is of cement brought in from the mainland. On a sale where there is an applicable resale certificate, seller's price is $100. Tax is reported and remitted by the seller in the amount of $.50, at the one-half of one percent wholesale rate. However, the sale in fact is not at "wholesale" because the project consists in the improvement of a rental unit owned by the purchaser and which the purchaser continues to hold. Seller is assessed at the four percent rate applicable to sales other than at wholesale. The purchaser is liable to pay the seller $4.

(3) "Sale at wholesale", defined. See section 18-237-4.

(4) Duties of the seller. It is the duty of the seller, under the penalties prescribed by sections 237-41, 237-48, 231-34, and 231-39, HRS, to:
(A) Refuse to accept a resale certificate if it is not in proper form and properly made out; or if having due regard to the type of property sold, the nature and character of the business of the purchaser, and the generally known customs or practices of the purchaser's trade, it appears that the sales made to the purchaser will not be sales at wholesale, or will not be sales at wholesale to the extent stated in the certificate;

(B) Make inquiry and ascertain the facts when, having due regard to the type of property sold, the nature and character of the business of the purchaser, and the generally known customers or practices of the purchaser's trade, the seller has reason to believe that some of the sales to the purchaser, in addition to those of which the seller is notified, are not sales at wholesale;

(C) Report for taxation at the rate of four percent all sales of tangible personal property which the seller knows are not sales at wholesale, unless upon inquiry the seller ascertains the facts as to those sales which, in fact, are sales at wholesale;

(D) Keep as a part of the seller's records all resale certificates accepted by the seller, notices of inapplicability of such resale certificates to particular sales, and notices of revocation of such certificates; and

(E) Keep proper records, as required by section 237-14, HRS, correctly segregating the items of gross income, gross proceeds of sales, and value of products taxable at less than four percent, in order that a lesser rate may be applied.

(5) Duties of the purchaser. It is the duty of the purchaser, under the penalties prescribed by sections 237-41, 237-48, and 231-34, HRS, to:
(A) Furnish to sellers only resale certificates as are in proper form and properly made out;

(B) Give notice of revocation of resale certificates furnished to sellers, if the purchaser no longer holds a general excise tax license, if the purchaser has a different license number under the general excise tax law from that stated on the certificate, or in any other case of a material change in facts;

(C) Furnish to sellers the facts as to whether sales are at wholesale; and

(D) Keep as a part of the purchaser's records copies of all resale certificates given by the purchaser, notices of inapplicability of such resale certificates to particular sales, and notices of revocation of such certificates.

(6) Forms of resale certificates. Three forms of resale certificates are prescribed, two types of general form and a special form which may be used by sellers, at their option, for sales to purchasers who are in the contracting business, or who are subject to taxation the same as if engaged in the contracting business, of materials and commodities as set forth in section 18-237-4(a)(3), in connection with a particular project identified in the special form of certificate.

[Eff 2/16/82; am 12/1/88; am 2/1/89; am 7/1/90; am and ren § 18-237-13-02 12/27/90] (Auth: HRS §§ 231-3(9), 237-8) (Imp: HRS § 237-13)

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