Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 237 - GENERAL EXCISE TAX LAW › Subchapter 2 - LICENSES; TAX; EXEMPTIONS › Section 18-237-16.5-01 - Definitions

Current through June, 2024
For purposes of sections
				  18-237-16.5-02 to
				  18-237-16.5-07, unless the context
				  otherwise requires:
"Lease" means the rental of real property under an
				  instrument in writing by which one conveys real property for a specified term
				  and for a specified consideration, and includes the written extension or
				  renegotiation of a lease, and any holdover tenancy.
"Lessee" means one who holds real property under a lease,
				  and includes a sublessee. A lessee or sublessee includes a sublessor subject to
				  both the tax and applicable deduction under section
				  237-16.5,
				  HRS, provided real property or space is conveyed by a sublease.
"Lessor" means one who conveys real property by a lease, and
				  includes a sublessor. A lessor does not include a person who is not subject to
				  the taxes imposed by chapter
				  237, HRS, or a person whose gross
				  proceeds or gross income from leasing the real property or space is not taxable
				  under chapter
				  237, HRS.
Example 1:
L leases unimproved Hawaii real
				  property X to A. A then subleases real property X and A's improvements (e.g.,
				  Building Y) to B. Finally, B subleases real property X and Building Y to C.
				  Assume that L, A and B are taxable under chapter
				  237, HRS, on their respective rental
				  income from real property X and Building Y. L, A, and B are lessors. A, B, and
				  C are lessees.
"Personal services" means services that are unrelated to the
				  "operation of the property" (as the term is defined in section
				  514A-3,
				  HRS) such as secretarial services, messenger services, and receptionist
				  services because the services directly benefit the lessee's real property or
				  space rather than the common elements of the real property or space.
"Real property or space" means the area actually rented and
				  used by the Lessee, including common elements as defined in section
				  514A-3,
				  HRS. Real property or space does not include the use of tangible personal
				  property or the bundling of "personal services," or both; such items instead
				  being subject to tax on other business as provided in section
				  237-13(10),
				  HRS. If a sublease does not specifically include the use of tangible personal
				  property or the receipt of personal services, it is presumed that the sublessor
				  is subject to the tax and is allowed the sublease deduction under section
				  237-16.5,
				  HRS. If it is determined that the real property or space includes tangible
				  personal property or the bundling of personal services or both, the real
				  property or space shall instead be subject to tax on other business under
				  section
				  237-13(10),
				  HRS, unless the sublessor complies with section
				  18-237-16.5-07 by providing proof
				  satisfactory to the department of taxation of the portion subject to the tax
				  and sublease deduction under section
				  237-16.5,
				  HRS.
Example 2:
Assume the same facts as Example 1
				  above except that sublessor B subleases real property X and Building Y to C and
				  the written sublease to C does not specifically include the use of tangible
				  personal property by C or the receipt of personal services by C. B is presumed
				  to be subject to tax under section
				  237-16.5,
				  HRS, and qualifies for the sublease deduction. If the department of taxation;
				  however, later determines that the "sublease" includes the use of tangible
				  personal property or receipt of personal services or both, all of B's income
				  will be subject to tax on other business under section
				  237-13(10),
				  HRS, unless B complies with section
				  18-237-16.5-07 by providing proof
				  satisfactory to the department of taxation of the portion which is subject to
				  tax under section
				  237-16.5,
				  HRS, and qualifies for the sublease deduction. The remaining portion of the
				  gross income attributable to tangible personal property, personal services, or
				  both shall be subject to tax on other business under
				  237-13(10),
				  HRS.
"Sublease" includes the rental of real property which is
				  held under a lease and is made in a written document by which one conveys real
				  property for a specified term and for a specified consideration. A sublease
				  includes the written extension or renegotiation of a sublease, any holdover
				  tenancy under the written sublease, multiple subleases of portions of the real
				  property, and any number of successive subleases of the same real property or
				  portions thereof.
"Sublessee" means one who holds real property under a
				  sublease.
"Sublessor" means one who conveys real property by sublease
				  under a lease. A sublessor includes a lessee subject to both the tax and
				  applicable deduction as determined under section
				  237-16.5,
				  HRS, provided a sublease is conveyed.