Act 271 expands Hawaii Revised Statutes (HRS) § 237-4 by applying the 0.5 percent wholesale general excise tax (GET) rate to the sale by a printer to a publisher of magazines or similar printed materials that are distributed to the public or defined segment of the public without charge under a contract with advertisers.  The 0.5 percent wholesale use tax rate also is applicable to a publisher importing magazines or printed materials for distribution in like manner.  Act 271 applies to a printer's gross income or gross proceeds received and to magazines or printed materials imported by a publisher after June 30, 2000.

The 0.5 percent wholesale GET rate applies when tangible personal property is sold for resale.  If the property is not resold, the GET is imposed at the 4 percent retail rate.  A sale of magazines and printed materials by a printer to a magazine publisher qualifies as a wholesale sale when the publisher resells the magazines or printed materials through subscription or newsstands.  By contrast, when the publisher is under a contract to distribute the magazines or printed materials to the public without charge, the sale by the printer is not a wholesale sale; it is a retail sale subject to the 4 percent GET rate prior to Act 271 because the magazines or printed materials are not resold.

Starting July 1, 2000, Act 271 will apply the 0.5 percent rate to these sales because the publisher's advertising revenue is subject to the GET at the 4 percent rate and is equivalent to the retail leg of the transaction.  The form of the "resale" should not result in a different GET consequence for this industry.

Example 1: Hawaii Printer prints a magazine for a publisher.  The magazine advertises products and services and is distributed to the public without charge.  The income received by Hawaii Printer will be subject to the 0.5 percent GET rate beginning July 1, 2000.

Act 271, however, does not apply to sales by a printer to "end-users," including sales of:  (1) brochures or catalogs printed for a retailer for distribution to prospective customers; (2) annual reports printed for a company; (3) forms printed for a company; and (4) brochures printed for a political candidate.

The 0.5 percent wholesale use tax rate applies when tangible personal property is imported for resale.  The 4 percent use tax rate, however, is applicable to a publisher importing magazines or printed materials that are distributed without charge prior to Act 271 because the magazines or printed materials are not resold.  Starting July 1, 2000, Act 271 will apply the 0.5 percent use tax rate to these imports.

Example 2:  Same facts as Example 1, except that the magazines are printed on the mainland and the publisher imports the magazines into Hawaii.  The publisher will be subject to the 0.5 percent use tax rate beginning July 1, 2000.

Forms and other tax information are available at the Department's website at:   www.state.hi.us/tax.

On Oahu, forms may be ordered by calling the Department's Forms Request Line at:   808-587-7572.  Persons who are not calling from Oahu, may call:  1-800-222-7572 (toll-free) to receive forms by mail or 808-678-0522 from a fax machine to receive forms by fax.
 
 

/s/
RAY K. KAMIKAWA
Director of Taxation

HRS Section Explained: HRS § 237-4