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July 11, 2002
RE: Act 209, Session Laws of Hawaii 2002 (Act 209), Relating to State and Local Taxation of Mobile Telecommunications Services

Act 209 conforms Hawaii's tax law to the federal Mobile Telecommunications Sourcing Act ("MTSA"), P.L. 106-252 (July 28, 2000), which takes effect on August 2, 2002.

The federal MTSA provides a simplified and uniform method of sourcing the income received from wireless telecommunication services provided by home service providers (HSPs). HSP is an industry term for those companies that provide mobile telecommunications services (e.g., cellular phones). Under the MTSA, all wireless calls are sourced to the customer's residential or business address, whichever is the place of primary use, regardless of the jurisdiction that the mobile telecommunications services originate from, terminate in, or pass through. 1

Under the MTSA's new sourcing rules, income received from a customer whose place of primary use is in Hawaii will be subject to Hawaii taxes: either the general excise tax (GET) for INTERstate or foreign mobile phone calls, or public service company (PSC) tax for INTRAstate mobile phone calls.

Example: Assume that Customer has a place of primary use in Hawaii. Customer travels to California with Customer's cell phone. While in San Francisco, Customer places a call to Los Angeles. Geographically, the call is an INTRAstate California call, however, under the federal sourcing rules, the call is treated as an INTRAstate Hawaii call and Hawaii would be able to assess the PSC tax on that transaction. 2

On the other hand, if a customer, whose place of primary use is in California, traveled to Hawaii and made a call from Oahu to Maui, the call would be subject to California taxes, rather than Hawaii taxes.

To further simplify filing for HSPs, Act 209 exempts income from wholesales of mobile telecommunications services (e.g., those sales that occur between two HSPs) from both the GET and PSC tax.

Please note that Act 209 does not impact the Public Utilities Commission's oversight of the affected industry.

Current forms and other tax information are available at the Department's website at: On Oahu, forms may be ordered by calling the Department's Forms Request Line at: 587-7572. Persons who are not calling from Oahu, may call: 1-800-222-7572 (toll-free) to receive forms by mail or by fax.

Director of Taxation
HRS Section Explained: HRS Sections 239-___, 237-13, 239-2.


1 The current method of sourcing this income is much more complex. Under a United States Supreme Court ruling, a state may tax INTERstate telecommunications if the call either originates or terminates in that state and if the call is charged to a service address in that state. Goldberg v. Sweet, 488 U.S. 252 (1989). In addition, income from calls that originate and terminate in Hawaii (INTRAstate calls) are subject to the PSC tax.

The Goldberg method, however, is not easily applied to wireless telecommunications because of the difficulty in identifying the precise location from which a call is placed or in which it terminates. For example, a wireless phone would allow a Hawaii resident driving through California to place a call to someone in Oklahoma and continue to drive into Nevada while still on the call. In this instance, the call originated in both California and Nevada and terminated in Oklahoma, but the Hawaii resident will probably be billed in Hawaii for the call. Thus, Goldberg is not instructive for the wireless telecommunications provider or the Hawaii resident (the customer) who must establish which state's taxes should apply to the call.

2 These same principles apply to INTERstate wireless phone calls. For example, assume the same facts except that Customer makes a wireless phone call to Georgia from San Francisco. The income from that call would be subject to the GET because Customer's place of primary use is in Hawaii.