SALT Report 2079 – The Hawaii Department of Taxation issued a letter ruling regarding the taxability of an environmental consultant’s services. The Taxpayer has a contract with the U.S. Department of Defense to conduct environmental impact studies on proposed Navy training activities located outside Hawaii.
According to the terms of the contract, the Taxpayer will collect data regarding the location’s existing environmental conditions and compile an Environmental Impact Study. The Taxpayer will evaluate the land resources, ocean resources, cultural resources, physical resources, land use regulations, socioeconomic factors, legal issues, transportation, utility, and infrastructure issues to determine the potential impact of the proposed activities on these resources.
Upon completion of the project, the Taxpayer will provide a final Environmental Impact Study report to the DoD. In most cases, the finished report will be sent electronically to various personnel, some of whom are located in Hawaii. However, if needed, the contract requires that the Taxpayer provide hard copies to personnel in Honolulu and Washington, D.C. The Taxpayer requested guidance as to the taxability of the reports that are delivered electronically as well as those that are delivered in a hard copy format.
The Department determined that because the Environmental Impact Study is related to sites outside Hawaii the reports are exempt from general excise tax as an exported service. However, if a report is completed on a Hawaiian location and an EIS is prepared for that site, the report would be used or consumed in Hawaii and therefore, taxable.
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