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 June, 2024
(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.