237-3 "Gross income", "gross proceeds of sale", defined. (a) "Gross income" means the gross receipts, cash or accrued, of the taxpayer received as compensation for personal services and the gross receipts of the taxpayer derived from trade, business, commerce, or sales and the value proceeding or accruing from the sale of tangible personal property, or service, or both, and all receipts, actual or accrued as hereinafter provided, by reason of the investment of the capital of the business engaged in, including interest, discount, rentals, royalties, fees, or other emoluments however designated and without any deductions on account of the cost of property sold, the cost of materials used, labor cost, taxes, royalties, interest, or discount paid or any other expenses whatsoever. Every taxpayer shall be presumed to be dealing on a cash basis unless the taxpayer proves to the satisfaction of the department of taxation that the taxpayer is dealing on an accrual basis and the taxpayer's books are so kept, or unless the taxpayer employs or is required to employ the accrual basis for the purposes of the tax imposed by chapter 235 for any taxable year in which event the taxpayer shall report the taxpayer's gross income for the purposes of this chapter on the accrual basis for the same period.

"Gross proceeds of sale" means the value actually proceeding from the sale of tangible personal property without any 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: gross receipts from the sale of securities as defined in 15 United States Code section 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 are permitted to be traded on a board of trade designated by the Commodities Futures Trading Commission under the Commodity Exchange Act, or evidence of indebtedness or, except as otherwise provided, from the sale of land in fee simple, improved or unimproved, dividends as defined by chapter 235; cash discounts allowed and taken on sales; the proceeds of sale of goods, wares, or merchandise returned by customers when the sale price is refunded either in cash or by credit; or the sale price of any article accepted as part payment on any new article sold, if the full sale price of the new article is included in the "gross income" or "gross proceeds of sales"; gross receipts from the sale or transfer of materials or supplies, interest on loans, or the provision of engineering, construction, maintenance, or managerial services by one "member" of an "affiliated public service company group" to another "member" of the same group as such terms are defined in section 239-2. Accounts found to be worthless and actually charged off for income tax purposes may be deducted, at corresponding periods, from gross proceeds of sale, or gross income, within this chapter, so far 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 if afterwards collected.

(c) For purposes of the tax imposed by this chapter, a taxpayer under section 237-13(3) may report on a cash basis; provided the taxpayer notifies the department of taxation of the basis upon which 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, c 1, 3(a); am L Sp 1959 2d, c 1, 16; HRS 237-3; am L 1977, c 26, 2; gen ch 1985; am L 1988, c 295, 2; am L 1989, c 118, 1; am L 1997, c 178, 3; am L 2000, c 262, 2]


Attorney General Opinions


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

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

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


Case Notes


"Gross income" defined. 34 H. 269 (1937).

Exemption from gross income, "sale of real property". 44 H. 584, 358 P.2d 539 (1961).

Sale defined. 44 H. 584, 358 P.2d 539 (1961).

Payments by manufacturers and other sellers to retailers under cooperative merchandising or advertising agreements are payments for services and constitute gross income. 51 H. 281, 458 P.2d 664 (1969).

Interest received on agreement of sale of land does not come within "gross receipts from the sale of land in fee simple". 52 H. 279, 474 P.2d 538 (1970).

Interest income received by a nondomiciliary vendor from sales of Hawaiian land found not within exemptions. 57 H. 436, 559 P.2d 264 (1977).

Taxability of transactions between joint venture and its member. 59 H. 307, 582 P.2d 703 (1978).

Cited: 40 H. 722, 728 (1955), 56 H. 321, 536 P.2d 91 (1975).



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