§237-25 Exemptions of sales and gross proceeds of sales to federal government, and credit unions. (a) Any provision of law to the contrary notwithstanding, there shall be exempted from, and excluded from the measures of, the tax imposed by chapter 237 all sales, and the gross proceeds of all sales, of:

(1) Intoxicating liquor, as defined in chapter 281, hereafter sold by any person licensed under chapter 281 to the United States (including any agency or instrumentality of the United States that is wholly owned or otherwise so constituted as to be immune from the levy of a tax under chapter 238 or 244D but not including national banks), or to any organization to which that sale is permitted by the proviso of "Class 3" of section 281-31, located on any Army, Navy, or Air Force reservation, but the person making the sale shall nevertheless, within the meaning of chapters 237, 244D, and 281 be deemed to be a licensed seller;

(2) Tobacco products and cigarettes, as defined in chapter 245, sold by any person licensed under the chapter to the United States (including any agency or instrumentality thereof that is wholly owned or otherwise so constituted as to be immune from the levy of a tax under chapter 238 or 245 but not including national banks), but the person making the sale shall nevertheless, within the meaning of chapters 237 and 245, be deemed to be a licensed seller;

(3) Other tangible personal property sold by any person licensed under this chapter to the United States (including any agency, instrumentality, or federal credit union thereof but not including national banks), and to any state-chartered credit union, but the person making such sale shall nevertheless, within the meaning of this chapter, be deemed a licensed seller; and

(4) When the amount of property sold by a licensee turns upon the amount of the property sold through a vending machine or similar device to the customer using the device, there shall not be deemed to have occurred any sale covered by an exemption under paragraph (1), (2), or (3).

(b) Nothing in this section shall be deemed to exempt any sales to or by a federal cost-plus contractor, as defined in chapter 237, or the gross proceeds thereof; with respect to all such activities and transactions, taxes shall be levied, returned, computed, and assessed the same as if this section had not been enacted, and in the case of an election made under sections 237-13(2)(F) and 237-13(3)(C)(ii), the tax shall be computed the same as upon a sale to the state government.

(c) Nothing in this section shall be deemed to exempt any person engaging or continuing in a service business or calling from any part of the tax imposed upon the person for such activity, and the person shall not be entitled to deduct any amount for tangible personal property furnished in conjunction therewith even though the person separately bills or otherwise shows the amount of the gross income of the business derived from the furnishing of the property.

(d) The exemption granted by this section shall apply to the seller of products sold in the State as provided in subsection (a) in respect of the privilege of manufacturing or producing, as well as the privilege of selling, and the value or gross proceeds of sales of the products so sold shall be excluded from the measure of the tax imposed by chapter 237 upon the seller as a manufacturer or producer. [L 1951, c 284, §§1, 2; am L 1953, c 183, §§1, 2; am L 1955, c 214, §1; RL 1955, §117-21.5; am L 1957, c 34, §7; am L Sp 1959 2d, c 1, §16; HRS §237-25; am L 1968, c 7, §2; am L 1971, c 4, §4; am L 1985, c 16, §8; gen ch 1985; am L 1986, c 344, §11; am L 1987, c 239, §6; am L 1989, c 8, §2 and c 149, §1; am L 1993, c 220, §3; am L 1994, c 141, §3 and c 274, §1]

Attorney General Opinions

Sales of tangible personal property made to Federal Credit Unions are exempt from the state general excise tax. Att. Gen. Op. 65-29.

The Hawaii general excise tax cannot be imposed upon sellers who sell tangible personal property to National Banks. Att. Gen. Op. 66-16.