Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 2 - DIVISION OF INCOME FOR TAX PURPOSES › Section 18-235-21-02 - Two or more businesses of a single taxpayer

Current through June, 2024
(a) A
				taxpayer may have more than one trade or business. In such cases, it is
				necessary to determine the business income attributable to each separate trade
				or business. The income of each business then is apportioned by an
				apportionment formula which takes into consideration the instate and outstate
				factors which relate to the trade or business the income of which is being
				apportioned.
Example:
The taxpayer is a conglomerate with
				  three operating divisions. One division is engaged in manufacturing aerospace
				  items for the federal government. Another division is engaged in growing coffee
				  products. The third division produces and distributes motion pictures for
				  theaters and television. Each division operates independently; there is no
				  strong central management. Each division operates in this State as well as in
				  other states. In this case, it is fair to conclude that the taxpayer is engaged
				  in three separate trades or businesses. Accordingly, the amount of business
				  income attributable to the taxpayer's trade or business activities in this
				  State is determined by applying an appropriate apportionment formula to the
				  business income of each separate trade or business.
(b) The determination of whether the
				activities of the taxpayer constitute a single trade or business or more than
				one trade or business will turn on the facts in each case. In general, the
				activities of the taxpayer will be considered a single business if there is
				evidence to indicate that the segments under consideration are integrated with,
				dependent upon, or contribute to each other. The following factors are
				considered to be good indicia of a single trade or business, and the presence
				of any of these factors creates a strong presumption that the activities of the
				taxpayer constitute a single trade or business:
(1) A taxpayer is generally engaged in a
				single trade or business when all of its activities are in the same general
				line. For example, a taxpayer which only operates a chain of retail grocery
				stores will almost always be engaged in a single trade or business.
(2) A taxpayer is almost always engaged in a
				single trade or business when its various divisions or segments are engaged in
				different steps in a large, vertically structured enterprise. For example, a
				taxpayer which explores for and mines copper ores; concentrates, smelts and
				refines the copper ores; and fabricates the refined copper into consumer
				products is engaged in a single trade or business, regardless of the fact that
				the various steps in the process are operated substantially independently of
				each other with only general supervision from the taxpayer's executive
				offices.
(3) A taxpayer which might
				otherwise be considered as engaged in more than one trade or business is
				properly considered as engaged in one trade or business when there is a strong
				central management, coupled with the existence of centralized departments for
				such functions as financing, advertising, research, or purchasing. Thus, some
				conglomerates may properly be considered as engaged in only one trade or
				business when the central executive officers are normally involved in the
				operations of the various divisions and there are centralized offices which
				perform for the divisions the normal matters which a truly independent business
				would perform for itself, such as accounting, personnel, insurance, legal,
				purchasing, advertising, or financing.