Opinion ID: 1208714
Heading Depth: 1
Heading Rank: 3

Heading: Division of Income Agency Theory.

Text: Both of the 1971 agreements between Taxpayer and the Directory Company provided that the latter's share of the directory revenues shall be collected by the Telephone Company for the account and benefit of and as the exclusive property of the Directory Company, and the Telephone Company as agent for the Directory Company, shall remit to the Directory Company its proportionate share of such revenues on a periodic basis. Taxpayer argues that, where a principal-agency relationship exists, taxes will not be payable by the agent on receipts he collects for, and that flow through to, his principal. Therefore, it contends, it should have been allowed to exclude from its reportable gross income the portions of directory revenues that were collected for and on behalf of the Directory Company. We find no merit in Taxpayer's argument. HRS § 237-1(2), which designates who is liable for payment of general excise tax, provides in part: Person or company includes every individual, partnership, society, unincorporated association, joint adventure, group, hui, joint stock company, corporation, trustee, personal representative, trust estate, decedent's estate, trust, or other entity, whether such persons are doing business for themselves or in a fiduciary capacity, and whether the individuals are residents or nonresidents of the State, and whether the corporation or other association is created or organized under the laws of the State or of another jurisdiction. Any person who has in his possession, for sale in the State, the property of a nonresident owner, other than as an employee of such owner, shall be deemed the seller of the property, when sold. (Emphasis added). From the language of this provision, we believe that it was the clear intent of the legislature to impose the tax upon all revenues received by individuals doing business in the state, irrespective of whether such business is carried out in an individual capacity or as an agent to another. Insofar as Taxpayer was jointly engaged with the Directory Company in the business of publishing, soliciting advertising in, and renting telephone directories, and insofar as it collected the Directory Company's share of the revenues earned as a result of those activities, it was doing business as both an individual and a fiduciary, and, accordingly, its tax liability should be based on the entire amounts of directory revenues. [13]