Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-38-06.05 - Publishing

Current through June, 2024
(a) Except as specifically modified in this
				section, when a person in the business of publishing, selling, licensing, or
				distributing newspapers, magazines, periodicals, trade journals, or other
				printed material has income from sources both within and without Hawaii, the
				amount of business income from sources within Hawaii from that business
				activity shall be determined pursuant to sections
				235-21 to
				235-39, HRS, or
				the Multistate Tax Compact (section
				255-1, HRS),
				except as modified by this section.
(b) In this section, unless the context
				clearly requires otherwise:
"Outer-jurisdictional property" means tangible personal
				  property, such as orbiting satellites, undersea transmission cables, and the
				  like, that are owned or rented by the taxpayer and used in the business of
				  publishing, licensing, selling, or otherwise distributing printed material, but
				  are not physically located in any particular state.
"Print or printed material" includes the physical embodiment
				  or printed version of any thought or expression, such as a play, story,
				  article, column, or other literary, commercial, educational, artistic, or other
				  written or printed work. The determination of whether an item is, or consists
				  of, print or printed material shall be made without regard to its content.
				  Printed material may take the form of a book, newspaper, magazine, periodical,
				  trade journal, or any other form of printed matter, and may be contained on any
				  medium or property.
"Purchaser" and "subscriber" mean the individual, residence,
				  business, or other outlet which is the ultimate or final recipient of the print
				  or printed material. Neither of these terms includes a wholesaler or other
				  distributor of print or printed material.
"Terrestrial facility" shall include any telephone line,
				  cable, fiber optic, microwave, earth station, satellite dish, antenna, or other
				  relay system or device that is used to receive, transmit, relay, or carry any
				  data, voice, image, or other information that is transmitted from or by any
				  outer-jurisdictional property to the ultimate recipient of the
				  information.
(c) Business
				income shall be apportioned using the following rules.
(1) The following rules relate to the
				property factor.
(A) All real property and
				tangible personal property, including outer-jurisdictional property, whether
				owned or rented, that are used in the business shall be included in the
				denominator of the property factor.
(B) The following rules relate to the
				property factor numerator.
(i) All real and
				tangible personal property owned or rented by the taxpayer and used in Hawaii
				during the tax period shall be included in the numerator of the property
				factor.
(ii) Outer-jurisdictional
				property owned or rented by the taxpayer and used in Hawaii during the tax
				period shall be included in the numerator of the property factor in the ratio
				that the value of the property attributable to its use by the taxpayer in
				business activities in Hawaii bears to the total value of the property
				attributable to its use in the taxpayer's business activities everywhere.
The value of outer-jurisdictional property to be attributed
				  to the numerator of the property factor of Hawaii shall be determined by the
				  ratio that the number of uplinks and downlinks (sometimes referred to as
				  "half-circuits") that were used during the tax period to transmit from Hawaii
				  and to receive in Hawaii any data, voice, image, or other information bears to
				  the total number of uplinks and downlinks, or half-circuits, that the taxpayer
				  used for transmissions everywhere.
If information regarding uplink and downlink or half-circuit
				  usage is not available, or if that measurement of activity is not applicable to
				  the type of outer-jurisdictional property used by the taxpayer, the value of
				  such property to be attributed to the numerator of the property factor of
				  Hawaii shall be determined by the ratio that the amount of time (in terms of
				  hours and minutes of use), or any other measurement of use of
				  outer-jurisdictional property that was used during the tax period to transmit
				  from Hawaii and to receive in Hawaii any data, voice, image, or other
				  information, bears to the total amount of time or other measurement of use that
				  was used for transmissions everywhere.
(iii) Outer-jurisdictional property shall be
				considered to have been used by the taxpayer in its business activities within
				Hawaii when that property, wherever located, is employed by the taxpayer in any
				manner in the publishing, sale, licensing, or other distribution of books,
				newspapers, magazines, or other printed material and any data, voice, image, or
				other information is transmitted to or from Hawaii either through an earth
				station or terrestrial facility located in Hawaii.
Example
: One example of the use of
				  outer-jurisdictional property is where the taxpayer either owns its own
				  communications satellite or leases the use of uplinks, downlinks, circuits, or
				  time on a communications satellite for the purpose of sending messages to its
				  newspaper printing facilities or employees in a state. The state or states in
				  which any printing facility that receives the satellite communications is
				  located and the state from which the communications were sent, under this
				  section, would apportion the cost of the owned or rented satellite to their
				  respective property factors based upon the ratio of the in-state use of the
				  satellite to its total usage everywhere.
Assume that ABC Newspaper Co. owns a total of $400,000,000
				  of property everywhere and that, in addition, it owns and operates a
				  communication satellite for the purpose of sending news articles to its
				  printing plant in Hawaii, as well as for communicating with its printing plants
				  and facilities or news bureaus, employees, and agents located in other states
				  and throughout the world. Also assume that the total value of its real and
				  tangible personal property that was permanently located in Hawaii for the
				  entire income year was valued at $3,000,000. Assume also that the total
				  original cost of the satellite is $100,000,000 for the tax period and that of
				  the 10,000 uplinks and downlinks of satellite transmissions used by the
				  taxpayer during the tax period, 200 or 2 percent are attributable to satellite
				  communications received in and sent from Hawaii. Assume further that the
				  company's mobile property has an original cost of $4,000,000 and was used in
				  Hawaii for 95 days.
The property factor is determined as follows:
Value of property permanently in
							 Hawaii:
$3,000,000
Value of mobile property (95/365 x
							 $4,000,000):
$1,041,096
Value of satellite property used in-state (.02 x
							 $100,000,000):
$2,000,000
Total value of property attributable to
							 state:
$6,041,096
Property factor
							 ($6,041,096/$500,000,000)
0.012082