Uniform Division of Income for Tax

HRS div. 1, tit. 14, ch. 235, pt. II

in effect

HRS §235-21 Definitions

235-21. Definitions As used in this part, unless the context otherwise requires: "Business income" means income arising from transactions and activity in the regular course of the taxpayer's trade or business and includes income from tangible and intangible property if the acquisition, management, and disposition of the property constitute integral parts of the taxpayer's regular trade or business operations. "Commercial domicile" means the principal place from which the trade or business of the taxpayer is directed or managed. "Compensation" means wages, salaries, commissions, and any other form of remuneration paid to employees for personal services. "Nonbusiness income" means all income other than business income. "Public utility" has the meaning given that term in section 269-1. "Sales" means all gross receipts of the taxpayer not allocated under sections 235-24 to 235-28. "State" means any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, and any foreign country or political subdivision thereof. [L 1967, c 33, pt of §1; HRS §235-21]

HRS §235-22 Taxpayers affected

235-22. Taxpayers affected Any taxpayer having income from business activity which is taxable both within and without this State, other than activity as a public utility or the rendering of purely personal services by an individual, shall allocate and apportion the taxpayer's net income as provided in this part. [L 1967, c 33, pt of §1; HRS §235-22; gen ch 1985]

HRS §235-23 Taxable in another state

235-23. Taxable in another state For purposes of allocation and apportionment of income under this part, a taxpayer is taxable in another state if: (1) In that state the taxpayer is subject to a net income tax, a franchise tax measured by net income, a franchise tax for the privilege of doing business, or a corporate stock tax, or (2) That state has jurisdiction to subject the taxpayer to a net income tax regardless of whether, in fact, the state does or does not. [L 1967, c 33, pt of §1; HRS §235-23; gen ch 1985]

HRS §235-24 Specified nonbusiness income

235-24. Specified nonbusiness income Rents and royalties from real or tangible personal property, capital gains, interest, dividends, or patent or copyright royalties, to the extent that they constitute nonbusiness income, shall be allocated as provided in sections 235-25 to 235-27. [L 1967, c 33, pt of §1; HRS §235-24]

HRS §235-26 Allocation of capital gains and losses

235-26. Allocation of capital gains and losses (a) Capital gains and losses from sales of real property located in this State are allocable to this State. (b) Capital gains and losses from sales of tangible personal property are allocable to this State if: (1) The property had a situs in this State at the time of the sale; or (2) The taxpayer's commercial domicile is in this State and the taxpayer is not taxable in the state in which the property had a situs. (c) Except in the case of the sale of a partnership interest, capital gains and losses from sales of intangible personal property are allocable to this State if the taxpayer's commercial domicile is in this State. (d) Gain or loss from the sale of a partnership interest is allocable to this State in the ratio of the original cost of partnership tangible property in the State to the original cost of partnership tangible property everywhere, determined at the time of the sale. If more than fifty per cent of the value of a partnership's assets consists of intangibles, gain or loss from the sale of the partnership interest shall be allocated to this State in accordance with the sales factor of the partnership for its first full tax period immediately preceding its tax period during which the partnership interest was sold. [L 1967, c 33, pt of §1; HRS §235-26; am L 1989, c 19, §1]

HRS §235-28 Allocation of patent and copyright royalties

235-28. Allocation of patent and copyright royalties (a) Patent and copyright royalties are allocable to this State: (1) If and to the extent that the patent or copyright is utilized by the payer in this State, or (2) If and to the extent that the patent or copyright is utilized by the payer in a state in which the taxpayer is not taxable and the taxpayer's commercial domicile is in this State. (b) A patent is utilized in a state to the extent that it is employed in production, fabrication, manufacturing, or other processing in the state or to the extent that a patented product is produced in the state. If the basis of receipts from patent royalties does not permit allocation to states or if the accounting procedures do not reflect states of utilization, the patent is utilized in the state in which the taxpayer's commercial domicile is located. (c) A copyright is utilized in a state to the extent that printing or other publication originates in the state. If the basis of receipts from copyright royalties does not permit allocation to states or if the accounting procedures do not reflect states of utilization, the copyright is utilized in the state in which the taxpayer's commercial domicile is located. [L 1967, c 33, pt of §1; HRS §235-28]

HRS §235-29 Apportionment of business income; percentage

235-29. Apportionment of business income; percentage All business income shall be apportioned to this State by multiplying the income by a fraction, the numerator of which is the property factor plus the payroll factor plus the sales factor, and the denominator of which is three. [L 1967, c 33, pt of §1; HRS §235-29]

HRS §235-31 Apportionment; property factor; owned and used property

235-31. Apportionment; property factor; owned and used property Property owned by the taxpayer is valued at its original cost. Property rented by the taxpayer is valued at eight times the net annual rental rate. Net annual rental rate is the annual rental rate paid by the taxpayer less any annual rental rate received by the taxpayer from subrentals. [L 1967, c 33, pt of §1; HRS §235-31]

HRS §235-32 Apportionment; property factor; average value

235-32. Apportionment; property factor; average value The average value of property shall be determined by averaging the values at the beginning and ending of the tax period but the director of taxation may require the averaging of monthly values during the tax period if reasonably required to reflect properly the average value of the taxpayer's property. [L 1967, c 33, pt of §1; HRS §235-32]

HRS §235-33 Apportionment; payroll factor

235-33. Apportionment; payroll factor The payroll factor is a fraction, the numerator of which is the total amount paid in this State during the tax period by the taxpayer for compensation, and the denominator of which is the total compensation paid everywhere during the tax period. [L 1967, c 33, pt of §1; HRS §235-33]

HRS §235-34 Compensation; where paid

235-34. Compensation; where paid Compensation is paid in this State if: (1) The individual's service is performed entirely within the State; (2) The individual's service is performed both within and without the State, but the service performed without the State is incidental to the individual's service within the State; or (3) Some of the service is performed in the State and: (A) The base of operations or, if there is no base of operations, the place from which the service is directed or controlled is in the State; or (B) The base of operations or the place from which the service is directed or controlled is not in any state in which some part of the service is performed, but the individual's residence is in this State. [L 1967, c 33, pt of §1; HRS §235-34; am L 2017, c 12, §41]

HRS §235-35 Apportionment; sales factor

235-35. Apportionment; sales factor The sales factor is a fraction, the numerator of which is the total sales of the taxpayer in this State during the tax period, and the denominator of which is the total sales of the taxpayer everywhere during the tax period. L 1967, c 33, pt of §1; HRS §235-35

HRS §235-36 Apportionment; sales factor; tangible personalty

235-36. Apportionment; sales factor; tangible personalty Sales of tangible personal property are in this State if: (1) The property is delivered or shipped to a purchaser, other than the United States government, within this State regardless of the f.o.b. point or other conditions of the sale; or (2) The property is shipped from an office, store, warehouse, factory, or other place of storage in this State and the: (A) Purchaser is the United States government; or (B) Taxpayer is not taxable in the state of the purchaser. [L 1967, c 33, pt of §1; HRS §235-36; am L 2017, c 12, §42]

HRS §235-37 Apportionment; sales factor; nontangible personalty

235-37. Apportionment; sales factor; nontangible personalty Sales, other than sales of tangible personal property, are in this State: (1) In the case of intangible property, to the extent the intangible property is used in this State; or (2) In the case of a service, to the extent the service is used or consumed in this State. [L 1967, c 33, pt of §1; HRS §235-37; am L 2019, c 96, §2]

HRS §235-38 Equitable adjustment of formula

235-38. Equitable adjustment of formula If the allocation and apportionment provisions of this part do not fairly represent the extent of the taxpayer's business activity in this State, the taxpayer may petition for or the director of taxation may require, in respect to all or any part of the taxpayer's business activity, if reasonable: (1) Separate accounting; (2) The exclusion of any one or more of the factors; (3) The inclusion of one or more additional factors which will fairly represent the taxpayer's business activity in this State; or (4) The employment of any other method to effectuate an equitable allocation and apportionment of the taxpayer's income. [L 1967, c 33, pt of §1; HRS §235-38]

HRS §235-38.5 Application

235-38.5. Application It is the intent of the legislature that in administering this chapter, this part, and sections 235-4 and 235-5 or as a member of or administering the multistate tax compact under chapter 255 the department of taxation shall not use or allow the use of the worldwide method of unitary taxation upheld in Container Corporation of America v. The Franchise Tax Board, 463 U.S. 159. It is the intent of the legislature that the department of taxation shall continue to apply this chapter, part, sections 235-4 and 235-5, and chapter 255 as they were applied before the above case was decided. [L 1984, c 53, §2]

HRS §235-39 Citation of part

235-39. Citation of part This part may be cited as the "Uniform Division of Income for Tax Purposes Act". L 1967, c 33, pt of §1; HRS §235-39

Source: Hawaii State Legislature (capitol.hawaii.gov), via Internet Archive capturesURL: http://www.capitol.hawaii.gov/hrscurrent/Vol04_Ch0201-0257/HRS0235/HRS_0235-.htmFetched: 11/10/2026