Hawaii Administrative Rules
Title 18 - DEPARTMENT OF TAXATION
Chapter 251 - RENTAL MOTOR VEHICLE AND TOUR VEHICLE TAX
Subchapter 4 - IMPOSITION OF RENTAL MOTOR VEHICLE SURCHARGE TAX
Section 18-251-2-03 - Surcharge tax on rental motor vehicles or vehicles; six-month time period

Universal Citation: HI Admin Rules 18-251-2-03

Current through November, 2023

(a) If the motor vehicle or vehicle is customarily rented or leased for six months or less, it shall be presumed that the motor vehicle or vehicle is rented or leased and subject to this chapter.

(b) No presumption applies if the motor vehicle or vehicle is rented or leased for a period longer than six months, and the burden of proof remains with the lessor. If the lessor is able to prove to the director's satisfaction that the motor vehicle or vehicle is rented or leased for more than six months, the rental motor vehicle surcharge tax shall not be imposed.

(c) If a lease of more than six months is terminated before one-hundred eighty days have expired, the motor vehicle or vehicle may not be deemed to be subject to the rental motor vehicle surcharge tax.

Example:ABC Leasing Company leases cars for periods of one year or longer. Ms. Rita Renter, who is an out-of-state consultant on a long-term project in Hawaii, leases a car for a one-year term. The project, however, hits a snag two weeks after it gets underway and is postponed to the next year. Since her services are no longer needed, Ms. Renter returns the car to ABC Leasing Company. Although the car actually was rented for less than a full six months, the rental motor vehicle surcharge tax does not apply.

(d) If the department finds that a lessor is continuously entering into leases of longer than six months and the lessees are continuously terminating these leases, the burden is upon the lessor to show that the operation is not a surcharge tax avoidance scheme and subject to the rental motor vehicle surcharge tax.

(e) When a vehicle is rented or leased under separate month-to-month contracts for a period over six months, only an intention to rent the vehicle for one month at a time arises. The rental motor vehicle surcharge tax is imposed in this situation.

If, however, the lessor is able to show that the month-to-month rental or lease contracts conform to all of the following criteria, an intent to rent or lease for more than six months may be found for the lessor and the lessor will not be subject to the rental motor vehicle surcharge tax:

(1) The monthly rental or lease contracts are continuous with less than 24 hours elapsed time between the expiration of one contract and the next monthly contract;

(2) The monthly rental or lease contracts are for consecutive days without any breaks for a continuous rental or lease period totaling more than six months; and

(3) The lessor has written documentation to substantiate the continuous rental or lease of the vehicle for more than six months as provided in paragraphs (1) and (2).

The rental motor vehicle surcharge tax will not be imposed on the lessor for the seventh month and each month thereafter on the rental or lease of the vehicle under month-to-month contracts which conform with all of the criteria set forth above. The rental motor vehicle surcharge tax, nevertheless, is applicable for the preceding six-month period.

[Eff 1/27/92; am 8/12/02] (Auth: HRS §§ 231-3(9), 251-15(b)) (Imp: HRS § 251-2)

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