Services Originating in Hawaii for Use Outside of the State Not Subject to General Excise Tax

Friday, August 24th, 2012

 
 
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Hawaii
General

The Hawaii Department of Taxation recently issued a letter ruling discussing the tax treatment of services exported out-of-state. Haw. Ltr. Rul. No. 2012-12 (Dept. of Taxn. Aug. 6, 2012). The taxpayer is an independent contractor who edits and writes for a journal published outside of Hawaii. The taxpayer is paid for every issue edited. The taxpayer wanted to know whether these services were subject to the general excise tax.

While a majority of states exempt services from tax, services in Hawaii are subject to the general excise tax unless specifically listed as exempt. However, if a service is sourced outside of the state, meaning that the benefit of the service will be received outside of Hawaii, the service will be exempt from tax. Haw. Rev. Stat. sec. 237.53. In this case, the taxpayer performs their services in the state of Hawaii. If the benefit of the services were to be used and consumed in Hawaii, general excise tax would apply. However, the benefit of the service was received outside of the state, so the exemption applies, and the service will not be subject to general excise tax.

Please note that in order for the exemption to apply, the taxpayer must obtain a certificate from the out-of-state party certifying that the service purchased was to be used outside of the state of Hawaii.


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TTR has a website that companies subscribe to and use daily. This website provides a list of everything that can be bought or sold in the U.S. It provides simple answers to whether buying or selling these items is taxable (subject to a sales tax or other tax), and it provides all the legal authority to support these tax answers.

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