reglab/statecodes huggingface dataset:
2023 Hawaii Revised Statutes › Title 14. Taxation › 232E. Tax Review Commission › 232E-3 Duties.

§232E-3 Duties.
The commission shall conduct a systematic review of the State's tax structure, using such standards as equity and efficiency. Thirty days prior to the convening of the second regular session of the legislature after the members of the commission have been appointed, the commission shall submit to the legislature an evaluation of the State's tax structure and recommend revenue and tax policy, except that:
(1) For the commission appointed on or before July 1, 1980, or the replacement commission intended to function prior to the appointment of a new commission on or before July 1, 1985, the commission shall submit the required evaluation and recommendations to the legislature thirty days prior to the convening of the regular session of 1985;
(2) For the commission appointed on or before July 1, 2010, or the successor commission intended to function prior to the appointment of a new commission on or before July 1, 2015, the commission shall submit the required evaluation and recommendations to the legislature thirty days prior to the convening of the regular session of 2013; and
(3) For the commission appointed on or before July 1, 2015, or the successor commission intended to function prior to the appointment of a new commission on or before July 1, 2020, the commission shall submit the required evaluation and recommendations to the legislature thirty days prior to the convening of the regular session of 2018. [L 1979, c 218, pt of §2; am L 1983, c 212, §2; am L 2012, c 181, §1; am L 2016, c 222, §1]
2023 Hawaii Revised Statutes › Title 14. Taxation › 233. Tax Classification of Certain Business Relationships › 233-1 Certain relationship deemed as that of employer-employee.

§233-1 Certain relationship deemed as that of employer-employee.
Whenever a person, firm, corporation, or the like, shall engage or continue in this State in the business of selling tangible personal property, and shall cause such property to be distributed to, by, or through representatives, distributors, dealers, salespersons, peddlers, canvassers, carriers, truckers, or the like, the department of taxation may adopt, in the manner provided by law, one or more rules or regulations providing that for the purposes of the tax laws administered by the department the group, class, or category of persons or business described therein (to be determined by the department as may be appropriate for the purposes of the particular rule or regulation) shall, irrespective of whether the relationship or class of business otherwise would be deemed that of seller and buyer, principal and agent, or master and servant, be deemed to be that of employer and employee; provided that no rule or regulation adopted under this section shall apply to any group, class, or category of persons or business as to which the department shall determine, or it shall be shown:
(1) That the potential employee has been and will continue to be free from control or direction over the performance of the business or services undertaken by the potential employee, and also
(2) That the business or services are performed outside of all the places of business of the potential employer, and also
(3) That the potential employee is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the business or services in which the potential employee is engaged or which the potential employee has undertaken for, with, or at the behest of the potential employer.
As used in paragraphs (1), (2), and (3) "potential employee" means the person who by such rule or regulation would be classed as an employee, and "potential employer" means the person, firm, corporation, or the like, who by such rule or regulation would be classed as the employer. [L 1955, c 195, §1; ree L 1959, c 277, §5(a); am L Sp 1959 2d, c 1, §16; Supp, §117A-1; HRS §233-1; gen ch 1985, 1993]
Cross References
Rules, see chapter 91.
2023 Hawaii Revised Statutes › Title 14. Taxation › 233. Tax Classification of Certain Business Relationships › 233-2 Same: application of taxes.

§233-2 Same: application of taxes.
In the event of the adoption of a rule or regulation pursuant to section 233-1:
(1) The person, firm, corporation, or the like, who is the subject of the rule or regulation and thereafter engages or continues in the business of selling tangible personal property shall be:
(A) Deemed to be selling the property to the persons or entities who would be the buyers if, in fact, the representatives, distributors, dealers, salespersons, peddlers, canvassers, carriers, truckers, or the like were employees;
(B) Deemed to be the employer of the persons classed by the rule or regulation as employees; and
(C) Subject to all of the liabilities, duties, and obligations of the sellers and employers under the tax laws administered by the department of taxation;
(2) The persons so classed as employees shall:
(A) Not be deemed to be buying the property or reselling the property;
(B) Be deemed to be the employees of the person so deemed an employer; and
(C) Be subject to all of the liabilities, duties, and obligations of employees, under the tax laws administered by the department; and
(3) The rule or regulation of the department shall:
(A) Provide for the collection, in lieu of withholding, of taxes levied upon the persons so classed as employees in cases in which the persons themselves retain, from receipts handled by them, their fees, charges, commissions, markups, percentages, or other remuneration;
(B) Designate the fees, charges, commissions, markups, percentages, or other remuneration constituting the taxable compensation of the persons classed as employees; and
(C) Contain other provisions that may be necessary or proper to effectuate this chapter. [L 1955, c 195, §2; ree L 1959, c 277, §5(a); am L Sp 1959 2d, c 1, §16; Supp, §117A-2; HRS §233-2; gen ch 1993; am L 2017, c 12, §38]
2023 Hawaii Revised Statutes › Title 14. Taxation › 233. Tax Classification of Certain Business Relationships › 233-3 Selling personal property, defined.

§233-3 Selling personal property, defined.
As used in this chapter "the business of selling tangible personal property" includes both business classed as such under chapter 237 and also the rendering of a service which involves the consumption or use of tangible personal property furnished by the "potential employer" referred to in section 233-1. [L 1959, c 277, §5(b); Supp, §117A-3; HRS §233-3]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-2.35 Operation of certain Internal Revenue Code provisions not operative under section 235-2.3.

§235-2.35 Operation of certain Internal Revenue Code provisions not operative under section 235-2.3.
The following sections of the federal Internal Revenue Code of 1986, as amended, shall be operative for purposes of this chapter:
(1) Section 6038D (with respect to information with respect to foreign financial assets). With respect to persons required to report information under this section, section 6662(j) (with respect to imposition of accuracy-related penalties on underpayments) and section 6501(e)(1)(A)(ii) (with respect to limitations on assessment and collection) shall also be operative for purposes of this chapter and shall be applied consistently with the correlating provisions of sections 231-36.6 and 235-111;
(2) Section 6045B (with respect to returns relating to actions affecting basis in securities); and
(3) Section 6050W (with respect to returns relating to payments made in settlement of payment card and third party network transactions). [L 2010, c 112, §2; am L 2011, c 43, §5 and c 91, §3; am L 2012, c 179, §3]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-4.2 Persons lacking physical presence in the State; nexus presumptions.

§235-4.2 Persons lacking physical presence in the State; nexus presumptions.
A person that lacks physical presence in the State is presumed to be systematically and regularly engaging in business in the State and taxable under this chapter if, during the current or preceding calendar year:
(1) The person engages in two hundred or more business transactions with persons within the State; or
(2) The sum of the value of the person's gross income attributable to sources in this State equals or exceeds $100,000 or for a person that does business within and without the State the numerator of the person's sales factor for the State equals or exceeds $100,000. [L 2019, c 221, §1]
Note
Section applies to taxable years beginning after December 31, 2019. L 2019, c 221, §3.
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-4.5 Taxation of trusts, beneficiaries; credit.

§235-4.5 Taxation of trusts, beneficiaries; credit.
(a) There shall be excluded from gross income any intangible income, such as dividends and interest, earned by a trust sited in this State to the extent that, during the taxable year of the trust, the beneficial interest in the trust shall be held by a beneficiary or beneficiaries residing outside this State. This exclusion shall not apply to income received from real property held in a land trust formed under chapter 558.
(b) If a trust sited in this State owns one hundred per cent of the stock of a foreign corporation which does not engage in an active trade or business but acts solely as a holding company receiving intangible income, such as dividends and interest, the intangible income of the foreign corporation shall be excluded from gross income for Hawaii income tax purposes but only to the extent that the income of the trust beneficiaries is excluded from taxation under subsection (a). As used in this section, foreign corporation means a corporation not created or organized in the United States or under the laws of the United States, Hawaii, or any other state.
(c) Any resident beneficiary of a trust with a situs in another state may claim a credit for income taxes paid by the trust to the other state on any income received which is attributable to assets other than intangibles. [L 1985, c 283, §1; am L 1988, c 33, §1]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-6 Foreign manufacturing corporation; warehousing of products.

§235-6 Foreign manufacturing corporation; warehousing of products.
(a) For the purposes of sections 235-21 to 235-39, a foreign corporation engaged in the business of manufacturing without the State, having its manufactured products warehoused in this State by another person who is engaged in the business of warehousing in this State and whose compensation for providing the warehousing is included in the measure of the tax imposed by chapter 237 or 239, shall not be deemed to be carrying on a trade or business in this State if all of the following requirements are met:
(1) Every delivery of sale of such products so warehoused is made at the warehouse to fill an order for such property procured by a representative (as defined in subsection (b)) from a seller licensed under chapter 237 and purchasing such property for purposes of resale;
(2) Every order so procured was made subject to acceptance and was accepted by the corporation at an office located out of this State;
(3) No collection for the payment of the products delivered as described in paragraph (1) is made in this State by any of its employees or agents or by any representative; and
(4) Except as provided in this section, it is not carrying on a trade or business in this State within the meaning of sections 235-21 to 235-39.
(b) "Representative" means a salesperson, commission agent, broker, or other person who is authorized or employed as an independent contractor and not as an employee by the foreign manufacturing corporation described in subsection (a) to assist the manufacturer in selling its products in this State, by procuring orders for such sale, and who carries on such activities in this State (it being immaterial whether such activities are regular or intermittent), but whose functions and authority do not include the accepting of orders for, or the making of deliveries of, or the collecting of payment for deliveries of such products. [L 1963, c 70, §1; Supp, §121-4.1; HRS §235-6; am L 1992, c 134, §1; gen ch 1993]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-7.3 Royalties derived from patents, copyrights, or trade secrets excluded from gross income.

§235-7.3 Royalties derived from patents, copyrights, or trade secrets excluded from gross income.
(a) In addition to the exclusions in section 235-7, there shall be excluded from gross income, adjusted gross income, and taxable income, amounts received by an individual or a qualified high technology business as royalties and other income derived from any patents, copyrights, and trade secrets:
(1) Owned by the individual or qualified high technology business; and
(2) Developed and arising out of a qualified high technology business.
(b) With respect to performing arts products, this exclusion shall extend to:
(1) The authors of performing arts products, or any parts thereof, without regard to the application of the work-for-hire doctrine under United States copyright law;
(2) The authors of performing arts products, or any parts thereof, under the work-for-hire doctrine under United States copyright law; and
(3) The assignors, licensors, and licensees of any copyright rights in performing arts products, or any parts thereof.
(c) For the purposes of this section:
"Performing arts products" means:
(1) Audio files, video files, audiovideo files, computer animation, and other entertainment products perceived by or through the operation of a computer; and
(2) Commercial television and film products for sale or license, and reuse or residual fee payments from these products.
"Qualified high technology business" means a business that conducts more than fifty per cent of its activities in qualified research.
"Qualified research" means:
(1) The same as in section 41(d) of the Internal Revenue Code;
(2) The development and design of computer software for ultimate commercial sale, lease, license or to be otherwise marketed, for economic consideration. With respect to the software's development and design, the business shall have substantial control and retain substantial rights to the resulting intellectual property;
(3) Biotechnology;
(4) Performing arts products;
(5) Sensor and optic technologies;
(6) Ocean sciences;
(7) Astronomy; or
(8) Nonfossil fuel energy-related technology. [L 1999, c 178, §22; am L 2000, c 297, §6; am L 2001, c 221, §7; am L 2004, c 215, §6]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-9 Exemptions; generally.

§235-9 Exemptions; generally.
Except as provided in sections 235-61 to 235-67 relating to withholding and collection of tax at source, and section 235-2.4 relating to "unrelated business taxable income", the following persons and organizations shall not be taxable under this chapter: banks, building and loan associations, financial services loan companies, financial corporations, small business investment companies, trust companies, mortgage loan companies, financial holding companies, subsidiaries of financial holding companies as defined in chapter 241, and development companies taxable under chapter 241; insurance companies, agricultural cooperative associations, and fish marketing associations exclusively taxable under other laws; and persons engaged in the business of motion picture and television film production as defined by the director of taxation. [L Sp 1957, c 1, pt of §2; am L 1965, c 224, §4; Supp, §121-6; HRS §235-9; am L 1976, c 156, §7 and c 203, §4; am L 1979, c 62, §2(8); am L 1982, c 92, §4; gen ch 1985; am L 1987, c 239, §1(10); am L 1989, c 266, §3; am L 1992, c 106, §2; am L 1997, c 107, §2]
Attorney General Opinions
Definitions of "marriage" and "spouse" under the federal Defense of Marriage Act, Pub. L. No. 104-199, 110 Stat. 2419, may preclude civil union partners of the same gender under the State's Civil Union Act from filing jointly for federal income tax purposes, but they do not preclude civil union partners from filing joint tax returns for Hawaii income tax purposes. Att. Gen. Op. 11-2.
Case Notes
Exempting particular classes from income taxes does not render law objectionable on grounds of inequality. 35 H. 855 (1941), aff'd 130 F.2d 786 (1942).
Exemption is grant of immunity where otherwise liable to assessment. 35 H. 855 (1941), aff'd 130 F.2d 786 (1942).
Claims for exemption strictly construed. 36 H. 340 (1943).
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-9.5 Stock options from qualified high technology businesses excluded from taxation.

§235-9.5 Stock options from qualified high technology businesses excluded from taxation.
(a) Notwithstanding any law to the contrary, all income earned and proceeds derived from stock options or stock, including stock issued through the exercise of stock options or warrants, from a qualified high technology business or from a holding company of a qualified high technology business by an employee, officer, or director of the qualified high technology business, or investor who qualifies for the credit under section 235-110.9, that would otherwise be taxed as ordinary income or as capital gains to those persons shall be excluded from taxation under this chapter.
Similar provisions shall apply to options to acquire equity interests and to equity interests themselves with regard to entities other than corporations.
(b) For the purposes of this section:
"Holding company of a qualified high technology business" means any business entity that possesses:
(1) At least eighty per cent of the total voting power of the stock or other interest; and
(2) At least eighty per cent of the total value of the stock or other interest;
in the qualified high technology business.
"Income earned and proceeds derived from stock options or stock" includes income from:
(1) Dividends from stock or stock received through the exercise of stock options or warrants;
(2) The receipt or the exercise of stock options or warrants; or
(3) The sale of stock options or stock, including stock issued through the exercise of stock options or warrants.
"Qualified high technology business" means the same as defined in section 235-7.3. [L 1999, c 178, §20; am L 2000, c 297, §7; am L 2001, c 221, §8]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-13 Sales of residential land to lessees; involuntary conversion.

§235-13 Sales of residential land to lessees; involuntary conversion.
(a) A sale by an organization exempt under section 501(c)(3), or treated as an estate or trust under Subchapter J of the Internal Revenue Code to a lessee of the entire interest in the land of the lessor organization, estate, or trust shall be an involuntary conversion of property used in trade or business or a capital asset of the lessor organization, estate, or trust and shall not be a sale of property held by the lessor organization, estate or trust in the ordinary course of a trade or business, irrespective of the number of such sales in any taxable year, if:
(1) The lessee has a right to terminate such lease and to acquire the entire interest of the lessor in the land, which right exists by virtue of chapter 516 and not because of any private agreement or privately created condition;
(2) The lessee exercises the lessee's right to purchase such entire interest;
(3) The lessor organization, estate, or trust has held the land for a period determined under subsection (b) prior to the date of purchase by lessee; and
(4) The land is developed single-family residential land.
(b) The period for which a lessor organization, estate, or trust has held land, within the meaning of subsection (a)(3), shall be determined under the rules of section 1223 of the Internal Revenue Code, except that if such land shall have been acquired by the lessor organization, estate, or trust from a decedent, within the meaning of section 1014 of the Internal Revenue Code, or if such land shall have been acquired by the lessor organization, estate, or trust from a donor, within the meaning of section 1015 (other than section 1015(c)) of the Internal Revenue Code, the holding period shall include the period during which such land shall have been held by such decedent or by such donor and also the period if any for which such land shall have been held by an inter vivos or testamentary trust estate created by such decedent or by such donor.
(c) This section shall not apply with respect to any transaction governed by section 1055 of the Internal Revenue Code.
(d) As used in this section:
(1) "Lessee" means the original lessee and any successor who has the right under chapter 516 to bring about an involuntary conversion.
(2) "Lessor" means any fee simple owner, any sublessor, and any person entitled to share in the rents or subrents of the land involved in an involuntary conversion described in subsection (a).
(e) The gain derived from sales qualified as involuntary conversion of property under this section shall be treated as provided in section 1033 of the Internal Revenue Code of 1954, as amended. [L 1977, c 75, §1; gen ch 1985]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-15 Tax credits to promote the purchase of child passenger restraint systems.

§235-15 Tax credits to promote the purchase of child passenger restraint systems.
(a) Any taxpayer who files an individual income tax return for a taxable year may claim an income tax credit under this section against the Hawaii state individual net income tax.
(b) The tax credit shall be $25; provided that the taxpayer purchases one or more new child passenger restraint systems in the tax year for which the credit is properly claimed; and provided that such restraint system can be shown to be in substantial conformity with specifications for such restraint systems set forth by the federal motor vehicle safety standards which were in effect at the time of such purchase.
(c) If the tax credit claimed by the taxpayer under this section exceeds the amount of the income tax payments due from the taxpayer, the excess of credit over payments due shall be refunded to the taxpayer; provided that the tax credit properly claimed by a taxpayer who has no income tax liability shall be paid to the taxpayer; and provided that no refunds or payments on account of the tax credit allowed by this section shall be made for amounts less than $1.
(d) The director of taxation shall prepare such forms as may be necessary to claim a credit under this section, may require proof of the claim for the tax credit, and may adopt rules pursuant to chapter 91.
(e) All of the provisions relating to assessments and refunds under this chapter and under section 231-23(c)(1) shall apply to the tax credit under this section.
(f) Claims for the tax credit under this section, including any amended claims, shall be filed on or before the end of the twelfth month following the taxable year for which the credit may be claimed. [L 1982, c 134, §1]
Revision Note
In subsection (e), "231-23(c)(1)" substituted for "231-23(d)(1)" pursuant to §23G-15.
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-19 Exceptional trees; tax deduction.

§235-19 Exceptional trees; tax deduction.
(a) Subject to subsection (b), there shall be allowed as a deduction from gross income the amount, not to exceed $3,000 per exceptional tree, for amounts paid, excluding interest paid or accrued thereon, during the taxable year by an individual taxpayer for expenditures to maintain, on the taxpayer's real property, each exceptional tree that has been designated by the county arborist advisory committee under chapter 58 as an exceptional tree.
(b) No deduction shall be allowed to exceed the amount of expenditures deemed reasonably necessary by a certified arborist. No deduction shall be allowed in more than one taxable year out of every three consecutive taxable years.
(c) The director of taxation shall prepare such forms as may be necessary to claim a tax deduction under this section, may require proof of the claim for the tax deduction, including an affidavit signed by the certified arborist, and may adopt rules pursuant to chapter 91.
(d) For the purpose of this section, the term "exceptional tree" shall have the same meaning as defined in section 58-3. [L 2004, c 195, §2]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-20 Comfort letters; authority to assess fees; established.

§235-20 Comfort letters; authority to assess fees; established.
The department may assess and collect a fee for the issuance of any comfort letter of the department. All fees collected under this section shall be deposited into the tax administration special fund established under section 235-20.5. [L 2004, c 215, pt of §3]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-20.5 Tax administration special fund; established.

§235-20.5 Tax administration special fund; established.
(a)
There is established a tax administration special fund, into which shall be deposited:
(1) Fees collected under sections 235-20 and 235-110.9;
(2) Revenues collected by the special enforcement section pursuant to section 231-85; provided that in each fiscal year, of the total revenues collected by the special enforcement section, all revenues in excess of $2,000,000 shall be deposited into the general fund; and
(3) Fines assessed pursuant to section 237D-4.
(b) The moneys in the fund shall be used for the following purposes:
(1) Issuing comfort letters, letter rulings, written opinions, and other guidance to taxpayers;
(2) Issuing certificates under [section] 235-110.9;
(3) Administering the operations of the special enforcement section;
(4) Funding support staff positions in the special enforcement section; and
(5) Developing, implementing, and providing taxpayer education programs, including tax publications. [L 2004, c 215, pt of §3; am L 2007, c 206, § §3, 8; am L 2009, c 134, § §5, 13(1), (3); am L 2013, c 58, §1; am L 2014, c 89, §1; am L 2015, c 204, §2; am L 2018, c 123, §1; am L 2019, c 261, §1]
Note
Authorization to establish five new positions in the special enforcement section; funded pursuant to this section. L 2018, c 123, §2.
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-21 Definitions.

§235-21 Definitions.
As used in this part, unless the context otherwise requires:
"Business income" means income arising from transactions and activity in the regular course of the taxpayer's trade or business and includes income from tangible and intangible property if the acquisition, management, and disposition of the property constitute integral parts of the taxpayer's regular trade or business operations.
"Commercial domicile" means the principal place from which the trade or business of the taxpayer is directed or managed.
"Compensation" means wages, salaries, commissions, and any other form of remuneration paid to employees for personal services.
"Nonbusiness income" means all income other than business income.
"Public utility" has the meaning given that term in section 269-1.
"Sales" means all gross receipts of the taxpayer not allocated under sections 235-24 to 235-28.
"State" means any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, and any foreign country or political subdivision thereof. [L 1967, c 33, pt of §1; HRS §235-21]
Revision Note
Numeric designations deleted pursuant to §23G-15.
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-22 Taxpayers affected.

§235-22 Taxpayers affected.
Any taxpayer having income from business activity which is taxable both within and without this State, other than activity as a public utility or the rendering of purely personal services by an individual, shall allocate and apportion the taxpayer's net income as provided in this part. [L 1967, c 33, pt of §1; HRS §235-22; gen ch 1985]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-23 Taxable in another state.

§235-23 Taxable in another state.
For purposes of allocation and apportionment of income under this part, a taxpayer is taxable in another state if:
(1) In that state the taxpayer is subject to a net income tax, a franchise tax measured by net income, a franchise tax for the privilege of doing business, or a corporate stock tax, or
(2) That state has jurisdiction to subject the taxpayer to a net income tax regardless of whether, in fact, the state does or does not. [L 1967, c 33, pt of §1; HRS §235-23; gen ch 1985]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-24 Specified nonbusiness income.

§235-24 Specified nonbusiness income.
Rents and royalties from real or tangible personal property, capital gains, interest, dividends, or patent or copyright royalties, to the extent that they constitute nonbusiness income, shall be allocated as provided in sections 235-25 to 235-27. [L 1967, c 33, pt of §1; HRS §235-24]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-25 Rents; royalties.

§235-25 Rents; royalties.
(a) Net rents and royalties from real property located in this State are allocable to this State.
(b) Net rents and royalties from tangible personal property are allocable to this State:
(1) If and to the extent that the property is utilized in this State, or
(2) In their entirety if the taxpayer's commercial domicile is in this State and the taxpayer is not organized under the laws of or taxable in the state in which the property is utilized.
(c) The extent of utilization of tangible personal property in a state is determined by multiplying the rents and royalties by a fraction, the numerator of which is the number of days of physical location of the property in the state during the rental or royalty period in the taxable year and the denominator of which is the number of days of physical location of the property everywhere during all rental or royalty periods in the taxable year. If the physical location of the property during the rental or royalty period is unknown or unascertainable by the taxpayer, tangible personal property is utilized in the state in which the property was located at the time the rental or royalty payer obtained possession. [L 1967, c 33, pt of §1; HRS §235-25]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-26 Allocation of capital gains and losses.

§235-26 Allocation of capital gains and losses.
(a) Capital gains and losses from sales of real property located in this State are allocable to this State.
(b) Capital gains and losses from sales of tangible personal property are allocable to this State if:
(1) The property had a situs in this State at the time of the sale; or
(2) The taxpayer's commercial domicile is in this State and the taxpayer is not taxable in the state in which the property had a situs.
(c) Except in the case of the sale of a partnership interest, capital gains and losses from sales of intangible personal property are allocable to this State if the taxpayer's commercial domicile is in this State.
(d) Gain or loss from the sale of a partnership interest is allocable to this State in the ratio of the original cost of partnership tangible property in the State to the original cost of partnership tangible property everywhere, determined at the time of the sale. If more than fifty per cent of the value of a partnership's assets consists of intangibles, gain or loss from the sale of the partnership interest shall be allocated to this State in accordance with the sales factor of the partnership for its first full tax period immediately preceding its tax period during which the partnership interest was sold. [L 1967, c 33, pt of §1; HRS §235-26; am L 1989, c 19, §1]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-28 Allocation of patent and copyright royalties.

§235-28 Allocation of patent and copyright royalties.
(a) Patent and copyright royalties are allocable to this State:
(1) If and to the extent that the patent or copyright is utilized by the payer in this State, or
(2) If and to the extent that the patent or copyright is utilized by the payer in a state in which the taxpayer is not taxable and the taxpayer's commercial domicile is in this State.
(b) A patent is utilized in a state to the extent that it is employed in production, fabrication, manufacturing, or other processing in the state or to the extent that a patented product is produced in the state. If the basis of receipts from patent royalties does not permit allocation to states or if the accounting procedures do not reflect states of utilization, the patent is utilized in the state in which the taxpayer's commercial domicile is located.
(c) A copyright is utilized in a state to the extent that printing or other publication originates in the state. If the basis of receipts from copyright royalties does not permit allocation to states or if the accounting procedures do not reflect states of utilization, the copyright is utilized in the state in which the taxpayer's commercial domicile is located. [L 1967, c 33, pt of §1; HRS §235-28]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-29 Apportionment of business income; percentage.

§235-29 Apportionment of business income; percentage.
All business income shall be apportioned to this State by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales factor, and the denominator of which is three. [L 1967, c 33, pt of §1; HRS §235-29]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-30 Apportionment; property factor.

§235-30 Apportionment; property factor.
The property factor is a fraction, the numerator of which is the average value of the taxpayer's real and tangible personal property owned or rented and used in this State during the tax period and the denominator of which is the average value of all the taxpayer's real and tangible personal property owned or rented and used during the tax period. [L 1967, c 33, pt of §1; HRS §235-30]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-31 Apportionment; property factor; owned and used property.

§235-31 Apportionment; property factor; owned and used property.
Property owned by the taxpayer is valued at its original cost. Property rented by the taxpayer is valued at eight times the net annual rental rate. Net annual rental rate is the annual rental rate paid by the taxpayer less any annual rental rate received by the taxpayer from subrentals. [L 1967, c 33, pt of §1; HRS §235-31]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-32 Apportionment; property factor; average value.

§235-32 Apportionment; property factor; average value.
The average value of property shall be determined by averaging the values at the beginning and ending of the tax period but the director of taxation may require the averaging of monthly values during the tax period if reasonably required to reflect properly the average value of the taxpayer's property. [L 1967, c 33, pt of §1; HRS §235-32]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-33 Apportionment; payroll factor.

§235-33 Apportionment; payroll factor.
The payroll factor is a fraction, the numerator of which is the total amount paid in this State during the tax period by the taxpayer for compensation, and the denominator of which is the total compensation paid everywhere during the tax period. [L 1967, c 33, pt of §1; HRS §235-33]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-34 Compensation; where paid.

§235-34 Compensation; where paid.
Compensation is paid in this State if:
(1) The individual's service is performed entirely within the State;
(2) The individual's service is performed both within and without the State, but the service performed without the State is incidental to the individual's service within the State; or
(3) Some of the service is performed in the State and:
(A) The base of operations or, if there is no base of operations, the place from which the service is directed or controlled is in the State; or
(B) The base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed, but the individual's residence is in this State. [L 1967, c 33, pt of §1; HRS §235-34; am L 2017, c 12, §41]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-35 Apportionment; sales factor.

§235-35 Apportionment; sales factor.
The sales factor is a fraction, the numerator of which is the total sales of the taxpayer in this State during the tax period, and the denominator of which is the total sales of the taxpayer everywhere during the tax period. [L 1967, c 33, pt of §1; HRS §235-35]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-36 Apportionment; sales factor; tangible personalty.

§235-36 Apportionment; sales factor; tangible personalty.
Sales of tangible personal property are in this State if:
(1) The property is delivered or shipped to a purchaser, other than the United States government, within this State regardless of the f.o.b. point or other conditions of the sale; or
(2) The property is shipped from an office, store, warehouse, factory, or other place of storage in this State and the:
(A) Purchaser is the United States government; or
(B) Taxpayer is not taxable in the state of the purchaser. [L 1967, c 33, pt of §1; HRS §235-36; am L 2017, c 12, §42]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-37 Apportionment; sales factor; nontangible personalty.

§235-37 Apportionment; sales factor; nontangible personalty.
Sales, other than sales of tangible personal property, are in this State:
(1) In the case of intangible property, to the extent the intangible property is used in this State; or
(2) In the case of a service, to the extent the service is used or consumed in this State. [L 1967, c 33, pt of §1; HRS §235-37; am L 2019, c 96, §2]
Note
The 2019 amendment applies to taxable years beginning after December 31, 2019. L 2019, c 96, §4.
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-38 Equitable adjustment of formula.

§235-38 Equitable adjustment of formula.
If the allocation and apportionment provisions of this part do not fairly represent the extent of the taxpayer's business activity in this State, the taxpayer may petition for or the director of taxation may require, in respect to all or any part of the taxpayer's business activity, if reasonable:
(1) Separate accounting;
(2) The exclusion of any one or more of the factors;
(3) The inclusion of one or more additional factors which will fairly represent the taxpayer's business activity in this State; or
(4) The employment of any other method to effectuate an equitable allocation and apportionment of the taxpayer's income. [L 1967, c 33, pt of §1; HRS §235-38]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-38.5 Application.

§235-38.5 Application.
It is the intent of the legislature that in administering this chapter, this part, and sections 235-4 and 235-5 or as a member of or administering the multistate tax compact under chapter 255 the department of taxation shall not use or allow the use of the worldwide method of unitary taxation upheld in Container Corporation of America v. The Franchise Tax Board, 463 U.S. 159. It is the intent of the legislature that the department of taxation shall continue to apply this chapter, part, sections 235-4 and 235-5, and chapter 255 as they were applied before the above case was decided. [L 1984, c 53, §2]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-52 Tax in case of joint return or return of surviving spouse.

§235-52 Tax in case of joint return or return of surviving spouse.
In the case of a joint return of a husband and wife under section 235-93, the tax imposed, as near as may be, by this chapter shall be twice the tax which would be imposed if the taxable income were cut in half. For purposes of this section and section 235-53, a return of a surviving spouse, as defined in the Internal Revenue Code, shall be treated as a joint return of a husband and wife under section 235-93. [L Sp 1957, c 1, pt of §2; Supp, §121-9; HRS §235-52; am L 1982, c 22, §1(3); am L 1987, c 239, §1(12)]
Case Notes
Joint return, joint responsibility for tax deficiency. 49 H. 688, 427 P.2d 86 (1967).
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-53 Tax tables for individuals.

§235-53 Tax tables for individuals.
(a) Imposition of tax table tax:
(1) In general. In lieu of the tax imposed by section 235-51, there is hereby imposed for each taxable year on the taxable income of every individual:
(A) Who does not itemize the individual's deductions for the taxable year; and
(B) Whose taxable income for such taxable year does not exceed the ceiling amount,
a tax determined under tables, applicable to such taxable year, which shall be prescribed by the director. In the tables so prescribed, the amounts of tax shall be computed on the basis of the rates prescribed by section 235-51.
(2) Ceiling amount defined. For purposes of paragraph (1), the term "ceiling amount" means, with respect to any taxpayer, the amount (not less than $20,000) determined by the director for the tax rate category in which such taxpayer falls.
(3) Authority to prescribe tables for taxpayers who itemize deductions. The director may provide that this section shall apply also for any taxable year to individuals who itemize their deductions. Any tables prescribed under the preceding sentence shall be on the basis of taxable income.
(b) Section inapplicable to certain individuals. This section shall not apply to:
(1) An individual making a return for a period of less than twelve months on account of a change in annual accounting period, and
(2) An estate or trust.
(c) Tax treated as imposed by section 235-51. For purposes of this chapter, the tax imposed by this section shall be treated as tax imposed by section 235-51.
(d) Taxable income. Whenever it is necessary to determine the taxable income of an individual to whom this section applies, the taxable income shall be determined under section 235-2.4(a). [L Sp 1957, c 1, pt of §2; am L Sp 1959 2d, c 1, §16; Supp, §121-10; HRS §235-53; am L 1968, c 8, §2; am L 1977, c 46, §1; am L 1981, c 208, §3; am L 1987, c 239, §1(13), (14)]
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-54 Exemptions.

§235-54 Exemptions.
(a) In computing the taxable income of any individual, there shall be deducted, in lieu of the personal exemptions allowed by the Internal Revenue Code, personal exemptions computed as follows: Ascertain the number of exemptions which the individual can lawfully claim under the Internal Revenue Code, add an additional exemption for the taxpayer or the taxpayer's spouse who is sixty-five years of age or older within the taxable year, and multiply that number by $1,144, for taxable years beginning after December 31, 1984. A nonresident shall prorate the personal exemptions on account of income from sources outside the State as provided in section 235-5. In the case of an individual with respect to whom an exemption under this section is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual's taxable year begins, the personal exemption amount applicable to such individual under this subsection for such individual's taxable year shall be zero.
(b) In computing the taxable income of an estate or trust there shall be allowed, in lieu of the deductions allowed under subsection (a), the following:
(1) An estate shall be allowed a deduction of $400.
(2) A trust which, under its governing instrument, is required to distribute all of its income currently shall be allowed a deduction of $200.
(3) All other trusts shall be allowed a deduction of $80.
(c) A blind person, a deaf person, and any person totally disabled, in lieu of the personal exemptions allowed by the Internal Revenue Code, shall be allowed, and there shall be deducted in computing the taxable income of a blind person, a deaf person, or a totally disabled person, instead of the exemptions provided by subsection (a), the amount of $7,000. [L Sp 1957, c 1, pt of §2; am L 1960, c 4, §1; Supp, §121-11; HRS §235-54; am L 1970, c 90, §2 and c 180, §2; am L 1978, c 181, §1; am L 1980, c 241, §2; am L 1985, c 78, §1; am L 1987, c 239, §1(15); am L 1999, c 253, §4; am L 2009, c 60, §3; am L Sp 2009, c 14, § §1, 3]
Law Journals and Reviews
Rule of Strict Construction in Tax Cases, a Question of Classification or Exemption. 11 HBJ, no. 4, at 98 (1975).
Case Notes
Statutes granting exemptions are strictly construed against taxpayer. 56 H. 321, 536 P.2d 91 (1975).
2023 Hawaii Revised Statutes › Title 14. Taxation › 235. Income Tax Law › 235-55 Tax credits for resident taxpayers.

§235-55 Tax credits for resident taxpayers.
(a) Whenever an individual or person liable to the taxes imposed upon individuals, who is a resident of the State or who has filed a joint resident return under section 235-93, has become liable for income taxes to a state, or to the District of Columbia, Puerto Rico, or any other territory or possession of the United States, or to a foreign country upon any part of the individual's or person's taxable income for the taxable year, derived or received from sources without the State and taxed under the laws of such other jurisdiction irrespective of the residence or domicile of the recipient, there shall be credited against the tax payable by the individual or person under this chapter the tax so paid by the individual or person to the other jurisdiction upon the individual's or person's producing for the department of taxation satisfactory evidence:
(1) Of such tax payment; and
(2) That the laws of the other jurisdiction do not allow the individual or person a credit against the taxes imposed by such jurisdiction for the taxes paid or payable under this chapter, or do allow such credit in an amount which has been deducted in computing the amount of credit sought under this section.
(b) The application of such credit, however:
(1) Shall not be allowed with respect to any taxable income or any tax which under subchapter N of chapter 1 of the Internal Revenue Code of 1954 (which is applicable for federal purposes but not for state purposes) is or may be the subject of an exclusion, exemption, or tax credit; and
(2) Shall not operate to reduce the tax payable under this chapter to an amount less than that which would have been payable had the taxpayer been taxable only on the income from property owned, personal services performed, trade or business carried on, and other sources in the State.
(c) If any taxes paid to another jurisdiction for which a taxpayer has been allowed a credit under this section are at any time credited or refunded to the taxpayer, such fact shall be reported by the taxpayer to the department within twenty days after the credit or refund. Failure to make such report shall be deemed failure to make a return and subject to the penalties imposed by law in such cases. A tax equal to the credit allowed for the taxes so credited or refunded shall be due and payable from the taxpayer upon notice and demand from the department. If the amount of such tax is not paid within ten days from the date of the notice and demand, the taxpayer shall be subject to the usual penalties and interest for delinquency in payment.
(d) Nothing in this section shall be construed to permit a credit against the taxes imposed by this chapter on account of federal income taxes. [L Sp 1957, c 1, pt of §2; am L 1959, c 277, §9(a); am L Sp 1959 2d, c 1, §16; Supp, §121-12; HRS §235-55; gen ch 1985; am L 1996, c 187, §5]