§237-3  "Gross income","gross proceeds of sale", defined.  (a)  "Gross income"means the gross receipts, cash or accrued, of the taxpayer received ascompensation for personal services and the gross receipts of the taxpayerderived from trade, business, commerce, or sales and the value proceeding oraccruing from the sale of tangible personal property, or service, or both, andall receipts, actual or accrued as hereinafter provided, by reason of theinvestment of the capital of the business engaged in, including interest,discount, rentals, royalties, fees, or other emoluments however designated andwithout any deductions on account of the cost of property sold, the cost ofmaterials used, labor cost, taxes, royalties, interest, or discount paid or anyother expenses whatsoever.  Every taxpayer shall be presumed to be dealing on acash basis unless the taxpayer proves to the satisfaction of the department oftaxation that the taxpayer is dealing on an accrual basis and the taxpayer'sbooks are so kept, or unless the taxpayer employs or is required to employ theaccrual basis for the purposes of the tax imposed by chapter 235 for anytaxable year in which event the taxpayer shall report the taxpayer's grossincome for the purposes of this chapter on the accrual basis for the sameperiod.

"Gross proceeds of sale" means thevalue actually proceeding from the sale of tangible personal property withoutany deduction on account of the cost of property sold or expenses of any kind.

(b)  The words "gross income" and"gross proceeds of sales" shall not be construed to include:  grossreceipts from the sale of securities as defined in 15 United States Codesection 78c or similar laws of jurisdictions outside the United States,contracts for the sale of a commodity for future delivery and other agreements,options, and rights as defined in 7 United States Code section 2 that arepermitted to be traded on a board of trade designated by the CommoditiesFutures Trading Commission under the Commodity Exchange Act, or evidence ofindebtedness or, except as otherwise provided, from the sale of land in feesimple, improved or unimproved, dividends as defined by chapter 235; cashdiscounts allowed and taken on sales; the proceeds of sale of goods, wares, ormerchandise returned by customers when the sale price is refunded either incash or by credit; or the sale price of any article accepted as part payment onany new article sold, if the full sale price of the new article is included inthe "gross income" or "gross proceeds of sales"; grossreceipts from the sale or transfer of materials or supplies, interest on loans,or the provision of engineering, construction, maintenance, or managerialservices by one "member" of an "affiliated public servicecompany group" to another "member" of the same group as suchterms are defined in section 239-2.  Accounts found to be worthless andactually charged off for income tax purposes may be deducted, at correspondingperiods, from gross proceeds of sale, or gross income, within this chapter, sofar as they reflect taxable sales made, or gross income earned, after July 1,1935, but shall be added to gross proceeds of sale or gross income when and ifafterwards collected.

(c)  For purposes of the tax imposed by thischapter, a taxpayer under section 237-13(3) may report on a cash basis;provided the taxpayer notifies the department of taxation of the basis uponwhich the tax imposed by this chapter is to be reported. [L 1935, c 141, pt of§1; am L 1941, c 265, §1(a); RL 1945, §5444; RL 1955, §117-3; am L Sp 1957, c1, §3(a); am L Sp 1959 2d, c 1, §16; HRS §237-3; am L 1977, c 26, §2; gen ch1985; am L 1988, c 295, §2; am L 1989, c 118, §1; am L 1997, c 178, §3; am L2000, c 262, §2]

 

Attorney General Opinions

 

  With the exception of pre-bid costs, all items entering intothe total contract price of a Capehart project contractor constitute grossincome subject to general excise taxation.  Att. Gen. Op. 61-85.

  Interest income from agreement of sale not exempt as incomefrom "sale of land".  Att. Gen. Op. 62-1.

  Taxability of out-of-state travel agency conducting localtours and of local travel agent conducting out-of-state tours.  Att. Gen. Op.65-6.

 

Case Notes

 

  "Gross income", defined.  34 H. 269.

  Exemption from gross income, "sale of realproperty".  44 H. 584, 358 P.2d 539.  Sale defined. Id.

  Payments by manufacturers and other sellers to retailersunder cooperative merchandising or advertising agreements are payments forservices and constitute gross income.  51 H. 281, 458 P.2d 664.

  Interest received on agreement of sale of land does not comewithin "gross receipts from the sale of land in fee simple".  52 H.279, 474 P.2d 538.

  Interest income received by a nondomiciliary vendor fromsales of Hawaiian land found not within exemptions.  57 H. 436, 559 P.2d 264.

  Taxability of transactions between joint venture and itsmember.  59 H. 307, 582 P.2d 703.

  Cited:  40 H. 722, 728, 56 H. 321, 536 P.2d 91.