Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 251 - RENTAL MOTOR VEHICLE AND TOUR VEHICLE TAX › Subchapter 2 - DEFINITIONS; RENTAL MOTOR VEHICLE SURCHARGE TAX › Section 18-251-1-04 - "Rent or lease", defined; complimentary vehicles

Current through June, 2024
(a) As used in this chapter:
"Acknowledgment" means the same as the acknowledgment
				  required by section
				  437D-11,
				  HRS.
"Collision damage waiver" means any contract or contractual
				  provision whether separate from or a part of a rental agreement, whereby the
				  lessor agrees, for a charge, to waive any or all claims against the lessee for
				  damages to the rental motor vehicle during the term of the rental
				  agreement.
"Rent or lease" means granting temporary possession and use
				  of a motor vehicle or vehicle to a person for consideration, whether or not the
				  lessor receives monetary income from the granting of temporary possession and
				  use of the motor vehicle or vehicle. Consideration received from the rental or
				  lease of a motor vehicle or vehicle includes but is not limited to any money,
				  promise, act, acknowledgment of liability, forbearance, interest, value, gain,
				  advantage, benefit, payment in return for a waiver of legal rights, or profit
				  offered by one party to another in return for the other party's act or
				  promise.
Example
: ABC Cars and Hawaii Hotel combine
				  their services and sell room and car packages to tourists. ABC Cars also agrees
				  to give Hawaii Hotel use of several luxury cars for two days in exchange for
				  the use of a hotel suite for several nights. Cars used for the room and car
				  packages are subject to the surcharge tax. ABC Cars does not receive cash from
				  Hawaii Hotel for the hotel's use of the luxury cars; nevertheless, because ABC
				  Cars receives consideration in the form of the use of a hotel suite in exchange
				  for the hotel's use of the luxury cars, the luxury cars are also subject to the
				  rental motor vehicle surcharge tax.
(b) Motor vehicles or vehicles provided in
				conjunction with public relations and promotional activities, such as
				familiarization trips (commonly known as "fam trips") and get-away prize
				packages, shall be subject to the rental motor vehicle surcharge tax.
Example
: ABC Cars participates in a visitor
				  industry project to encourage travel agents to cultivate Hawaii as a vacation
				  destination by providing 6 cars for a one-week familiarization tour of the
				  islands. All 6 of the cars are subject to the rental motor vehicle surcharge
				  tax as follows: $2 a day for 7 days, for 6 cars totaling $84 ($14 x 6)
				  surcharge tax due.
Example
: In conjunction with a company
				  promotion, DEF Cars (DEF) gives away coupons to its special customers for "free
				  rentals", no rental rate charge for one day. All customers, including those
				  renting a car for one day or less, who use their coupons are asked to sign
				  rental agreements and contract for a collision damage waiver or to sign an
				  acknowledgment. Cars used by customers in this promotion are subject to the
				  rental motor vehicle surcharge tax for each day's rental, including the day for
				  which no rental rate is charged.
Example
: GHI Rentals (GHI) has a "frequent GHI
				  driver" program, which gives a free day's rental after a customer has rented a
				  car from GHI five times. After the customer has rented a car from GHI on five
				  occasions, the customer does not pay the rental fee on the next (or sixth)
				  rental. All customers receiving a free rental are asked to sign rental
				  agreements and contract for a collision damage waiver or to sign an
				  acknowledgment. Cars used by customers for the sixth rental period, which are
				  provided without charge, in the GHI frequent driver program are subject to the
				  rental motor vehicle surcharge tax.
(c) "Rent or lease" shall not apply to a
				motor vehicle or vehicle if a lessor provides a motor vehicle or vehicle to any
				person without receiving any consideration and the liability for the motor
				vehicle or vehicle remains solely with the lessor and is not acknowledged,
				shared by or paid for by the person using the motor vehicle or vehicle. These
				complimentary motor vehicles or vehicles may include motor vehicles or vehicles
				furnished to nonprofit charitable or educational corporations, associations, or
				similar organizations exempt from tax under the federal Internal Revenue Code
				of 1986, as amended, in conjunction with a charitable or educational
				project.
Example
: Rental Car Company is a sole
				  proprietorship. During the summer, Rental Car Company's owner allows his
				  visiting friends from the mainland to use the rental cars without charge.
				  Rental Car Company does not log the use of the cars on its books, nor are the
				  Rental Car Company's owner's friends required to sign a rental agreement,
				  acknowledge liability, provide insurance or proof of insurance, or sign a
				  collision damage waiver or an acknowledgment. The cars are not rented or leased
				  because neither Rental Car Company nor its owner receive any consideration. The
				  cars, therefore, are not subject to the rental motor vehicle surcharge tax when
				  they are loaned to the owner's friends.
Example
: ABC Charities (ABC) approaches XYZ
				  Cars (XYZ) and asks for a contribution from XYZ to support one of its projects.
				  Instead of giving cash, XYZ allows ABC to use one of its cars without paying
				  the rental fee for the length the project. XYZ asks ABC to provide proof of
				  insurance coverage in case there is an accident involving the car during the
				  time ABC is using the car. Thus, while XYZ, as owner of the car, may be liable
				  in the case of an accident, ABC also has acknowledged its liability for any
				  possible damage that may occur while using the car. Accordingly, although ABC
				  is not charged the rental fee, XYZ receives consideration, ABC's acknowledgment
				  of its shared liability for the car while using the car, and the car is subject
				  to the rental motor vehicle surcharge tax.
Example
: Hawaii Rent-A-Car Agency allows a
				  private nonprofit organization to use one of Hawaii Rent-A-Car Agency's station
				  wagons for a month for a public service project. The organization does not pay
				  any money to Hawaii Rent-A-Car Agency. Hawaii Rent-A-Car Agency also does not
				  request the organization to acknowledge its liability for possible damage to
				  the station wagon while using it, provide insurance coverage or proof of such
				  coverage, or to sign a collision damage waiver. Accordingly, Hawaii Rent-A-Car
				  Agency has received no consideration and the rental motor vehicle surcharge tax
				  does not apply.