§239-5 - Public utilities, generally.

§239-5 Public utilities, generally. (a) There shall be levied and assessed upon each public utility, exceptairlines, motor carriers, common carriers by water, and contract carriers taxedby section 239-6, a tax of such rate per cent of its gross income each yearfrom its public utility business as shall be determined in the mannerhereinafter provided. The tax imposed by this section is in lieu of all taxesother than those below set out, and is a means of taxing the personal propertyof the public utility, tangible and intangible, including going concern value. In addition to the tax imposed by this chapter there also are imposed incometaxes, the specific taxes imposed by chapter 249, the fees prescribed bychapter 269, any tax specifically imposed by the terms of the public utility'sfranchise or under chapter 240, the use or consumption tax imposed by chapter238, and employment taxes.

The rate of the tax upon the gross income ofthe public utility shall be four per cent; provided that if:

(1) A county provides by ordinance for a realproperty tax exemption for real property used by a public utility in its publicutility business and owned by the public utility (or leased to it by a leaseunder which the public utility is required to pay the taxes upon the property),and

(2) The county has not denied the exemption to thepublic utility, but excluding a denial based upon a dispute as to theownership, lease, or use of a specific parcel of real property,

then there shall be levied and assessed a tax inexcess of the four per cent rate determined in the manner hereinafter providedupon the gross income allocable to such county. The revenues generated fromthe tax in excess of the four per cent rate hereinbefore established shall bepaid by the public utility directly to such county based upon the proportion ofgross income from its public utility business attributable to such county,based upon the allocation made in the public utility's filings with the Stateof Hawaii; provided that if the gross income from the public utility businessattributable to such county is not so allocated in the public utility's Statefilings, then the gross income from the public utility business shall beequitably allocated to each county. The relative number of access lines ineach county shall be deemed an acceptable basis of equitable allocation fortelecommunication companies.

The rate of the tax in excess of the four percent rate hereinbefore established upon the gross income from the publicutility business shall be determined as follows:

If the ratio of the net income of the companyto its gross income is fifteen per cent or less, the rate of tax in excess ofthe four per cent rate on gross income shall be 1.885 per cent; for allcompanies having net income in excess of fifteen per cent of the gross, therate of the tax on gross income shall increase continuously in proportion tothe increase in ratio of net income to gross, at such rate that for eachincrease of one per cent in the ratio of net income to gross, there shall be anincrease of .2675 per cent in the rate of the tax.

The following formula may be used to determinethe rate, in which formula the term "R" is the ratio of net income togross income, and "X" is the required rate of the tax on gross incomefor the utility in question:

X =(26.75R-2.1275)%;

provided that in no case governed by the formulashall "X" be less than 1.885 per cent or more than 4.2 per cent.

However, if the gross income is apportionedunder section 239-8(b) or (c), there shall be no adjustment of the rate of taxon the amount of gross income so apportioned to the State on account of theratio of the net income to the gross income being in excess of fifteen percent, and it shall be assumed in such case that the ratio is fifteen per centor less.

(b) Notwithstanding subsection (a), the rateof the tax upon the portion of the gross income of a carrier of passengers byland which consists in passenger fares for transportation between points on ascheduled route, shall be 5.35 per cent. However, if the carrier has otherpublic utility gross income the fares nevertheless shall be included inapplying subsection (a) in determining the rate of tax upon the other publicutility gross income.

(1) A public utility that consists of the receiptsfrom the sale of its products or services to another public utility thatresells such products or services shall be one-half of one per cent; or

(2) A public utility engaged in the business ofselling telecommunication services to a person defined in section 237-13(6)(C)who resells such products or services, shall be as follows:

(A) In calendar year 2000, 5.5 per cent;

(B) In calendar year 2001, 5.0 per cent;

(D) In calendar year 2003, 4.0 per cent;

(E) In calendar year 2004, 3.5 per cent;

(F) In calendar year 2005, 3.0 per cent;

(G) In calendar year 2006, 2.5 per cent; and

(H) In calendar year 2007, and thereafter, 0.5per cent;

provided that the resale of the products, services,or telecommunication services is subject to taxation under this section orsubject to taxation at the highest rate under section 237-13(6); and providedfurther that the public utility's exemption from real property taxes imposed bychapter 246 shall be reduced by the proportion that its public utility grossincome described herein bears to its total public utility gross income. Whenever the public utility has other public utility gross income, the grossincome from the sale of its products or services to another public utility or aperson subject to section 237-13(6)(C) shall be included in applying subsection(a) in determining the rate of tax upon the other public utility gross income. The department shall have the authority to implement the tax rate changes inparagraph (2) by prescribing tax forms and instructions that require taxreporting and payment by deduction, allocation, or any other method todetermine tax liability with due regard to the tax rate changes. [L 1932 2d, c43, §4; RL 1935, §2143; RL 1945, §5674; RL 1955, §126-5; am L Sp 1957, c 1,§9(c) to (f); am L 1963, c 147, §2(e); am L 1965, c 201, §§30, 31; HRS §239-5;am L 1968, c 59, §2; am L 1974, c 135, §1; am L 1990, c 34, §13; am L 2000, c198, §14; am L 2001, c 64, §3; am L 2008, c 16, §10]

Note

L 2001, c 64, §7 provides:

"SECTION 7. Transition period. Commencing with theJuly 2001, installment of the remaining quarterly or monthly installments of thetax upon gross income which has been levied and assessed for the calendar year2001 under section 239-5(a), Hawaii Revised Statutes, that portion of each suchinstallment that is described in section 3 [amending §239-5(a)] of this Act asthe tax in excess of the rate of four per cent that is paid to a county if thecounty provides for a real property tax exemption for real property used by apublic utility in its public utility business, shall be paid to the respectivecounty director of finance as provided in section 3 [amending §239-5(a)] ofthis Act. Provided that for the period July 2001 to December 2001, if a publicutility is not required to pay to a particular county director of finance taxin excess of the rate of four per cent, as provided in section 3 [amending§239-5(a)] of this Act, the public utility shall not be liable to the State orrespective county for such portion of the installments of the tax imposed inexcess of the rate of four per cent under section 239-5(a), Hawaii RevisedStatutes, for the period July 2001 to December 2001."

Case Notes

"Net income" defined. 34 H. 269, aff'd 105 F.2d286; 34 H. 324.

The portion of tariff rates reflecting value of equipmentowned by taxpayer's customer is not income earned by taxpayer. 57 H. 477, 559P.2d 283.