Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 237 - GENERAL EXCISE TAX LAW › Subchapter 2 - LICENSES; TAX; EXEMPTIONS › Section 18-237-13(6)-06 - "Intermediary" between Service Provider and Customer

Current through June, 2024
In order for Service Provider to be eligible for the
				  intermediary services rate, the person requesting or ordering the service from
				  Service Provider must act as or act in the nature of an Intermediary between
				  Service Provider and the ultimate recipient of the benefits of such services
				  (Customer). The person requesting or ordering the service from the Service
				  Provider acts as or acts in the nature of an Intermediary when there is a
				  direct flow of services from Service Provider through Intermediary (or
				  Intermediaries) and then to Customer. As a mere conduit for the services en
				  route to Customer, Intermediary does not alter, use, or otherwise consume the
				  services provided by Service Provider. Service Provider's services are altered,
				  used or consumed if the services constitute a portion of the total services
				  performed by Intermediary for Customer, or Service Provider's services are
				  incorporated into services performed by other persons for Customer.
Example 1:
Intermediary provides salon
				  services. Customer requests a facial. Intermediary contracts with Service
				  Provider to provide Customer with the facial. Service Provider bills
				  Intermediary. Intermediary bills Customer. Customer pays Intermediary and
				  Intermediary pays Service Provider.
In order for Service Provider to be eligible for the
				  intermediary services rate, there must be a direct flow of services from
				  Service Provider to Customer, the ultimate recipient of the benefits. There is
				  a direct flow of services because the total services requested by Customer were
				  performed by Service Provider; Service Provider's services were not
				  incorporated in other services performed for Customer.
Example 2:
Intermediary is a magician. Customer
				  requests the performance of Intermediary. Intermediary contracts with Service
				  Provider, another magician, to perform for Customer. Service Provider bills
				  Intermediary. Intermediary bills Customer. Customer pays Intermediary and
				  Intermediary pays Service Provider.
In order for Service Provider to be eligible for the
				  intermediary services rate, there must be a direct flow of services from
				  Service Provider to Customer, the ultimate recipient of the benefits. There is
				  a direct flow of services because the total services requested by Customer were
				  performed by Service Provider; Service Provider's services were not
				  incorporated in other services performed for Customer.
However, if Intermediary contracted to put on a gala event
				  which includes a piano performance by Service Provider, there would not be a
				  direct flow of services because Service Provider's services would be
				  incorporated in other services performed for Customer. Service Provider would
				  be subject to the general excise tax at the rate of four percent.
Example 3:
Intermediary, an automobile dealer,
				  sells an automobile to Customer. Intermediary contracts with Service Provider
				  to perform cleaning, repairing, and restoring services on the automobile.
				  Service Provider bills Intermediary. Intermediary bills Customer. Customer pays
				  Intermediary and Intermediary pays Service Provider.
In order for Service Provider to be eligible for the
				  intermediary services rate, there must be a direct flow of services from
				  Service Provider to Customer, the ultimate recipient of the benefits. There is
				  no direct flow of services from Service Provider to Customer because the total
				  services requested by Customer were not performed by Service Provider; rather,
				  Service Provider's services were incorporated as part of the sale of the
				  automobile to Customer. Moreover, Intermediary, is engaged in the sale of goods
				  (automobiles), rather than a service business. The intermediary services rate
				  of one-half percent is not applicable to the payment Service Provider receives
				  from Intermediary. Service Provider is subject to the general excise tax at the
				  rate of four percent.
Example 4:
Intermediary, a graphic design firm,
				  contracts with Customer to develop an advertisement. Intermediary contracts
				  with Service Provider to provide illustrations. Service Provider bills
				  Intermediary. Intermediary bills Customer. Customer pays Intermediary and
				  Intermediary pays Service Provider.
In order for Service Provider to be eligible for the
				  intermediary services rate, there must be a direct flow of services from
				  Service Provider to Customer, the ultimate recipient of the benefits, or
				  another person who acts as or acts in the nature of an Intermediary. There is
				  no direct flow of services from Service Provider to Customer because the total
				  services requested by Customer were not performed by Service Provider; rather,
				  Service Provider's services were incorporated in the advertisement with other
				  services performed for Customer. The intermediary services rate of one-half
				  percent is not applicable to the payment Service Provider receives from
				  Intermediary. Service Provider is subject to the general excise tax at the rate
				  of four percent.
Example 5:
Intermediary, a management
				  consultant, enters into a contract with Customer to study the reason for
				  Customer's declining sales. Intermediary contracts with Service Provider, a
				  marketing company, to do part of the study. Service Provider bills
				  Intermediary. Intermediary bills Customer. Customer pays Intermediary and
				  Intermediary pays Service Provider.
In order for Service Provider to be eligible for the
				  intermediary services rate, there must be a direct flow of services from
				  Service Provider to Customer, the ultimate recipient of the benefits, or
				  another person who acts as or acts in the nature of an Intermediary. There is
				  no direct flow of services from Service Provider to Customer because the total
				  services requested by Customer were not performed by Service Provider; rather,
				  Service Provider's services were incorporated in the study with other services
				  performed for Customer. The intermediary services rate of one-half percent is
				  not applicable to the payment Service Provider receives from Intermediary.
				  Service Provider is subject to the general excise tax at the rate of four
				  percent.