Hawaii Administrative Rules
Title 18 - DEPARTMENT OF TAXATION
Chapter 237 - GENERAL EXCISE TAX LAW
Subchapter 2 - LICENSES; TAX; EXEMPTIONS
Section 18-237-16.5-02 - Tax on written real property leases; deduction allowed

Universal Citation: HI Admin Rules 18-237-16.5-02

Current through August, 2024

(a) Section 237-16.5, HRS, imposes the general excise tax at the rate of four percent upon the gross proceeds or gross income received or derived from the business of leasing real property in the State. A Lessee who subleases real property under a sublease shall be allowed a deduction from the amount of gross proceeds or gross income received from the Sublessee under section 237-16.5, HRS, and sections 18-237-16.5-03 to 18-237-16.5-06. In no case shall the amount of the deduction exceed the total amount received from the sublease of the real property.

Example 3: Lessor L leases its building to lessee A, who does not sublease the building or any portion of the building. A is subject to the tax under section 237-16.5, HRS, but is not allowed the sublease deduction because there is no sublease.

(b) The requirements for the sublease deduction are as follows:

(1) The Lessor must submit to the Lessee, a certificate that certifies that the Lessor is licensed and taxable under the general excise tax law;

(2) The Lessee must be licensed and taxable under the general excise tax law;

(3) The Lessee must report the amount paid to the Lessor, the amount of the sublease deduction, and the name and general excise tax number of the Lessor on the Lessee's general excise tax return in lieu of filing a copy of the certificate with the general excise tax return;

(4) The Lessee's sublease deduction is limited to leases and subleases in writing and related to the same real property or space; and

(5) The Lessee must compute the allocations required by section 18-237-16.5-04 and section 18-237-16.5-05 with no allowances for changes during the specified term of the sublease, provided that this requirement shall not apply to a lease with terms that vary in the amount of periodic rent due, including a percentage lease with fixed minimum rent, a percentage lease with no minimum rent, a combination percentage lease with fixed minimum rent or percentage leases with no minimum rent, whichever amount is higher, or a graduated or step-up lease.

(c) The form of the certificate shall be prescribed by the department of taxation.

(d) The absence of the certificate shall give rise to the presumption that the Lessee is not allowed the sublease deduction.

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