LICENSES;TAX; EXEMPTIONS

 

§237-9  Licenses; penalty.  [Repealand reenactment on June 30, 2014.  L 2009, c 134, §13(3).]  (a)  Except asprovided in this section, any person who has a gross income or gross proceedsof sales or value of products upon which a privilege tax is imposed by thischapter, as a condition precedent to engaging or continuing in such business,shall in writing apply for and obtain from the department of taxation, upon aone-time payment of the sum of $20, a license to engage in and to conduct suchbusiness, upon condition that the person shall pay the taxes accruing to theState under this chapter, and the person shall thereby be duly licensed toengage in and conduct the business.  The license shall not be transferable andshall be valid only for the person in whose name it is issued and for thetransaction of business at the place designated therein.  The license may beinspected and examined, and shall at all times be conspicuously displayed atthe place for which it is issued.

(b)  Licenses and applications therefor shallbe in such form as the department shall prescribe, except that where thelicensee is engaged in two or more forms of business of differentclassification, the license shall so state on its face.  The license providedfor by this section shall be effective until canceled in writing.  Anyapplication for the reissuance of a previously canceled license identificationnumber after December 31, 1989, shall be regarded as a new license applicationand subject to the payment of the one-time license fee of $20.  The directormay revoke or cancel any license issued under this chapter for cause asprovided by rules adopted pursuant to chapter 91.

(c)  Any person who receives gross income orgross proceeds of sales or value of products from engaging in business in theState and who fails to obtain a license or receives gross income or grossproceeds of sales or value of products from engaging in business in the Statewithout a license required under this section may be fined not more than $500;provided that a cash-based business may be fined not less than $500 and notmore than $2,000, as determined by the director or the director's designee. The penalty under this subsection shall be in addition to any other penaltyprovided under law and may be waived or canceled upon a showing of good cause.

(d)  If the license fee is paid, the departmentshall not refuse to issue a license or revoke or cancel a license for theexercise of a privilege protected by the First Amendment of the Constitution ofthe United States, or for the carrying on of interstate or foreign commerce, orfor any privilege the exercise of which, under the Constitution and laws of theUnited States, cannot be restrained on account of nonpayment of taxes, nor shallsection 237-46 be invoked to restrain the exercise of such a privilege, or thecarrying on of such commerce.

(e)  The director may permit a person engagedin network marketing, multi-level marketing, or other similar business toobtain the license required under this section for purposes of becoming a taxcollection agent on behalf of its direct sellers.  The tax collection agentshall report, collect, and pay over the taxes due under this chapter andchapter 238 on behalf of its direct sellers who are covered by the taxcollection agreement.  The tax collection agent's direct sellers shall bedeemed to be licensed under this chapter; provided that the licensure shallapply solely to the business activity conducted directly through the marketingarrangement.  Under this section, a tax collection agent shall:

(1)  Notify all of its direct sellers making sales inthe State that it has been designated to collect, report, and pay over the taximposed by this chapter and chapter 238 on their behalf on the businessactivity conducted through the marketing arrangement;

(2)  If required by the director as a condition ofobtaining the license, furnish with the annual return, a list (includingidentification numbers) of all direct sellers for the taxable year who havebeen provided (by the tax collection agent) information returns required undersection 6041A of the Internal Revenue Code of 1986, as amended, and any otherinformation that is relevant to ensure proper payment of taxes due under thissection; and

(3)  Be personally liable for the taxes due andcollected under the tax collection agreement if taxes are collected, but notreported or paid, together with penalties and interest as provided by law.

(f)  For the purposes of this section:

"Cash-based business" has the samemeaning as in section 231-93.

"Consumer product" shall includetangible consumer products and intangible consumer services.

"Direct seller" means any person whois engaged in the trade or business of selling (or soliciting the sale of) consumerproducts:

(1)  To any buyer on a buy-sell basis, adeposit-commission basis, or any similar basis, that the director prescribes byrule adopted pursuant to chapter 91, for resale other than in a permanentretail establishment;

(2)  Other than in a permanent retail establishment;provided that:

(A)  Substantially all the remuneration(whether or not paid in cash) for the sale of consumer products is directlyrelated to sales or other output rather than to the number of hours worked; and

(B)  The sales of consumer products by theperson are performed pursuant to a written contract that provides that theperson will not be treated as an employee with respect to those sales forfederal or state tax purposes.

"Direct seller" includes individualswho realize remuneration dependent on the productivity of other individuals inthe marketing arrangement.

"Network marketing" or"multi-level marketing" means a marketing arrangement in whichconsumer products are distributed and sold to or through direct sellers. [L1935, c 141, §21; RL 1945, §5451; am L 1951, c 165, §2; RL 1955, §117-10; am L1957, c 34, §11(c); am L Sp 1957, c 1, §3(c); am L Sp 1959 2d, c 1, §16; HRS§237-9; gen ch 1985; am L 1989, c 6, §1; am L 1995, c 92, §12; am L 1998, c143, §1; am L 2009, c 134, §6]

 

Case Notes

 

  Licensed means, licensed under this chapter.  37 H. 314,aff'd 174 F.2d 21.

  Cited:  40 H. 121, 132; 216 F.2d 700; 41 H. 615, 621.