Hawaii – Taxability of Scientific Work for the U.S. Government

SALT Report 1286 – The Hawaii Department of Taxation ruled that a subcontractor’s gross proceeds from the construction, installation, and maintenance of energy test platforms were exempt from Hawaii general excise tax.  The work was done as part of a contract between a researcher, who was the prime contractor, a subcontractor, and the U.S. Office of Naval Research.

The Department based their decision on HRS § 237-26 which, “exempts from general excise tax [the] gross proceeds derived by a contractor or subcontractor arising from the performance of any scientific work under a contract or subcontract entered into with the United States.”

In this case, the subcontractor’s work was considered to be the manufacturing portion of the scientific work and the energy test platforms qualified as the scientific facility.  Ultimately the ONR will use the platforms to record a range of energy and performance information and then compare this data from the specific testing site to that of other testing sites.

For Further Information:

Hawaii Department of Taxation – Letter Ruling No. 2011-10