Hawaii Administrative Rules
Title 18 - DEPARTMENT OF TAXATION
Chapter 237 - GENERAL EXCISE TAX LAW
Subchapter 2 - LICENSES; TAX; EXEMPTIONS
Section 18-237-20-04 - "Additional monetary consideration", defined
Current through November, 2023
(a) "Additional monetary consideration" means any amount, which Taxpayer receives that is in excess of the cost or advance to Third Party. For there to be no additional monetary consideration, the amount received by Taxpayer must be no more than the cost or advance.
Example 1: Taxpayer, a consultant, is hired by Reimbursing Party to purchase theater tickets. Taxpayer purchases tickets from Third Party. Taxpayer receives from Reimbursing Party a fee and the amount covering the price of the tickets. Conclusion: Taxpayer received additional monetary consideration because Taxpayer received the fee, an amount in excess of the amount paid to Third Party.
Example 2: Taxpayer is in the business of selling equipment. Taxpayer and an equipment manufacturer (Reimbursing Party) have entered into a preexisting cost-splitting agreement to equally share the expenses of advertising manufacturer's equipment and Taxpayer's dealership. The advertising is expected to equally benefit manufacturer and Taxpayer. The agreement provides that: Taxpayer will initially pay an advertising agency (Third Party) to provide advertising services, Taxpayer will provide manufacturer with an invoice reflecting all advertising costs, and manufacturer will repay Taxpayer for fifty percent of the advertising costs without including any amount for Taxpayer's overhead, salaries, incidental expenses, or profit. Manufacturer repays Taxpayer. Conclusion: Taxpayer does not receive additional monetary consideration.
Example 3: Taxpayer, a real estate broker, and real estate sales agents (Reimbursing Parties), classified as independent contractors for tax purposes, have entered into preexisting cost-splitting agreements relating to the use of Taxpayer's phones by the agents to make long-distance telephone calls at Taxpayer's offices. Taxpayer makes its own long-distance telephone calls. Taxpayer pays the phone company (Third Party) for Taxpayer's and the agents' long-distance charges and collects from each agent the exact amount of long-distance charges attributable to that agent at the end of each month without including any amount for Taxpayer's overhead, salaries, incidental expenses, or profit. Conclusion: Taxpayer does not receive additional monetary consideration.
(b) "Additional monetary consideration" includes money, property, services, or any-in-kind payment or value, which Taxpayer receives that is, related to the cost or advance.
Example 4: Assume the same facts as above in Example 3, except that at the end of the month the Taxpayer receives a "rebate" from the phone company based on the volume of long-distance calls. The Taxpayer does not give any portion of the "rebate" to agents that paid for their long-distance calls. Conclusion: The Taxpayer receives additional monetary consideration unless that rebate is passed-on to each agent in proportion to the calls made by each agent and Taxpayer.
(c) "Additional monetary consideration" does not include amounts received by the Taxpayer that are unrelated to the cost or advance to Third Party.
Example 5: Taxpayer, a supermarket, advances $1,000 for Fish Market (Reimbursing Party) to a Third Party to purchase a truck. The Taxpayer receives from Fish Market $1,000 for the advance on the truck and $100 for a refund resulting from returned fish products. Conclusion: The Taxpayer did not receive additional monetary consideration because Taxpayer's $100 refund is unrelated to the cost or advance to Third Party.
Example 6: The Taxpayer manages owner's (Reimbursing Party) rental unit under a management agreement and receives a fee. The agreement requires the owner's approval for major expenditures relating to the rental unit. The carpet in the unit must be replaced. Taxpayer locates a contractor (Third Party) to replace the carpet. The carpet replacement is a major expenditure under the terms of the management agreement, and Taxpayer secures the owner's approval for the carpet replacement. Taxpayer initially pays contractor for the carpet and owner repays Taxpayer without including any amount for Taxpayer's overhead, salaries, incidental expenses, or profit. Conclusion: The Taxpayer did not receive additional monetary consideration because Taxpayer's management fee is unrelated to the cost or advance to contractor.
[Eff JUL 15, 2006] (Auth: HRS §§ 231-3(9), 237-8) (Imp: HRS § 237-20)