Hawaii – Sales to the Federal Government

SALT Report 1272 – The Hawaii Department of Taxation issued guidance regarding the taxability of sales of furniture and related items to the federal government.  A Hawaii taxpayer purchases computer furniture, workstations, filing and storage systems, multipurpose furniture, and tables from a mainland manufacturer and resells the items to the federal government. The taxpayer also provides delivery and installation services, as well as staging, warehousing, and site preparation for the federally owned facilities that are located in and out of Hawaii.

The Department ruled that the company’s gross receipts from the sale of goods to the federal government are not subject to general excise tax pursuant to HRS § 237-25(a) which states that sales “shall be exempted from, and excluded from the measures of, the tax imposed by chapter 237… [including] all sales and the gross proceeds of all sales, of…tangible personal property …to the United States, including any agency, instrumentality, or federal credit union.”

Also, the department ruled that any related installation fees and service fees are exempt from general excise tax because they are incidental to the sale of goods.  Fees from non-Hawaii installations are exempt from use tax as well, because they are not imported services and not consumed in Hawaii.

In addition, the taxpayer is not subject to use tax on the value of the goods delivered out-of-state or from installation services performed out-of-state by the dealer. However, goods sold by the taxpayer to the federal government that are to be used in Hawaii and are imported or purchased from an unlicensed seller are subject to use tax at the wholesale rate.

For Further Information: 

Hawaii Department of Taxation – Letter Ruling No. 2011-11