Haw. Code R. § 18-235-38-06.04

Current through November, 2024

Section 18-235-38-06.04 - Television and radio broadcasting

(a) When a person in the business of broadcasting film or radio programming, whether through the public airwaves, by cable, direct or indirect satellite transmission, or any other means of communication, either through a network (including owned and affiliated stations) or through an affiliated, unaffiliated, or independent television or radio broadcasting station, has income from sources both within and without Hawaii, the amount of business income from sources within Hawaii shall be determined pursuant to sections 235-21 to 235-39, HRS, or the Multistate Tax Compact (section 255-1, HRS), except as modified by this section.

(b) For definitions, rules, and examples for determining whether income shall be classified as business or nonbusiness income, see sections 18-235-21-01 to 18-235-21-04.

(c) In this section, unless the context clearly requires otherwise:

"Film" or "film programming" means any and all performances, events, or productions telecast on television, including news, sporting events, plays, stories, or other literary, commercial, educational, or artistic works, through the use of video tape, disc, or any other type of format or medium.

Each episode of a series of films produced for television shall constitute a separate film notwithstanding that the series relates to the same principal subject and is produced during one or more tax periods.

"Outer-jurisdictional property" means tangible personal property, such as orbiting satellites, undersea transmission cables, and the like, that are owned or rented by the taxpayer and used in the business of telecasting or broadcasting, but that are not physically located in any particular state.

"Radio" or "radio programming" means any and all performances, events, or productions that are broadcast on radio, including news, sporting events, plays, stories, or other literary, commercial, educational, or artistic works, through the use of an audio tape, disc, or any other format or medium.

Each episode of a series of radio programming produced for radio broadcast shall constitute a separate radio programming notwithstanding that the series relates to the same principal subject and is produced during one or more tax periods.

"Release" or "in release" means the placing of film or radio programming into service. A film or radio program is placed into service when it is first broadcast to the primary audience for which the program was created. Thus, for example, a film is placed in service when it is first publicly telecast for entertainment, educational, commercial, artistic, or other purposes. Each episode of a television or radio series is placed in service when it is first broadcast. A program is not placed in service merely because it is completed and therefore is in a condition or state of readiness and availability for broadcast, or merely because it is previewed to prospective sponsors or purchasers.

"Rent" includes license fees or other payments or consideration provided in exchange for the broadcast or other use of film or radio programming.

"State" includes the District of Columbia, the Commonwealth of Puerto Rico, or any possession or territory of the United States.

A "subscriber" to a cable television system is the individual residence or other outlet which is the ultimate recipient of the transmission.

"Telecast" or "broadcast" (sometimes used interchangeably with respect to television) means the transmission of television or radio programming, respectively, by an electronic or other signal conducted by radio waves, microwaves, wires, lines, coaxial cables, wave guides, fiber optics, satellite transmissions, or by any other means, directly or indirectly to viewers or listeners.

(d) The property factor shall be determined in accordance with sections 235-30 to 235-32, HRS, and the rules thereunder; the payroll factor in accordance with sections 235-33 to 235-34, HRS, and the rules thereunder; and the sales factor in accordance with sections 235-35 to 235-37, HRS, and the rules thereunder; except as modified by this section.

(e) The following rules relate to the property factor.

(1) The following rules apply with respect to the property factor in general.

(A) In the case of rented studios, the net annual rental rate shall include only the amount of the basic or flat rental charge by the studio for the use of a stage or other permanent equipment such as sound recording equipment and the like; except that additional equipment rented from other sources or from the studio not covered in the basic or flat rental charge and used for one week or longer (even though rented on a day-to-day basis) shall be included. Lump-sum net rental payments for a period which encompasses more than a single income year shall be assigned ratably over the rental period.

(B) No value or cost attributable to any outer-jurisdictional and film or radio programming property shall be included in the property factor.

(2) The following rules apply with respect to the property factor denominator.

(A) All real property and tangible personal property (other than outer-jurisdictional and film or radio programming property), whether owned or rented, that is used in the business shall be included in the denominator of the property factor.

(B) Audio or video cassettes, discs, or similar media containing film or radio programming and intended for sale or rental by the taxpayer for home viewing or listening shall be included in the property factor at their original cost. To the extent that the taxpayer licenses or otherwise permits others to manufacture or distribute cassettes, discs, or other media containing film or radio programming for home viewing or listening, the value of the cassettes, discs, or other media shall include the license, royalty, or other fees received by the taxpayer capitalized at a rate of eight times the gross receipts derived therefrom during the income year.

(C) Outer-jurisdictional and film or radio programming property shall be excluded from the denominator of the property factor.

(3) The following rules apply with respect to the property factor numerator.

(A) With the exception of outer-jurisdictional and film or radio programming property, all real and tangible personal property owned or rented by the taxpayer and used in Hawaii during the tax period shall be included in the numerator of the property factor as set forth in section 18-235-30-04.

(B) Outer-jurisdictional and film or radio programming property shall be excluded from the numerator of the property factor.

Example: XYZ Television Co. has a total value of all of its property everywhere of $500,000,000, including a satellite valued at $50,000,000 that was used to telecast programming into Hawaii and $150,000,000 in film property of which $1,000,000 worth was located in Hawaii the entire year. The total value of real and tangible personal property, other than film programming property, located in Hawaii for the entire income year was valued at $2,000,000. The movable and mobile property described in subparagraph (e)(3)(A) has a value of $4,000,000. That property was used in Hawaii for 100 days. The property factor is determined as follows:

Value of property permanently in Hawaii:	$2,000,000
Value of mobile and movable property (100/365 x $4,000,000):	1,095,600
Total value of property to be included in Hawaii's property factor numerator without apportionment of outer-jurisdictional and film property:	$3,095,600
Total value of property everywhere:	$500,000,000
Less value of satellite:	(50,000,000)
Less value of film property:	(150,000,000)
Total value of property to be used in denominator:	$300,000,000
Property factor ($3,095,600/$300,000,000):	.0103

(f) The following rules relate to the payroll factor.

(1) The denominator of the payroll factor shall include all compensation, including residual and profitparticipation payments, paid to employees during the income year, including that paid to directors, actors, newscasters, and other talent in their status as employees.

(2) With respect to the payroll factor numerator, compensation for all employees shall be attributed to the state or states as may be determined under sections 18-235-33-01 to 18-235-34-01.

(g) The following rules relate to the sales factor.

(1) The denominator of the sales factor shall include the total gross receipts derived by the taxpayer from transactions and activity in the regular course of its trade or business, except receipts excluded under section 18-235-38-03.

(2) The numerator of the sales factor shall include all gross receipts of the taxpayer from sources within Hawaii, including the following.

(A) Gross receipts, including advertising revenue, from television, film, or radio programming in release to or by a television station (independent or unaffiliated) or network of stations for broadcast shall be attributed to Hawaii in the ratio (hereafter "audience factor") that the audience for the station (or owned and affiliated stations in the case of networks) located in Hawaii bears to the total audience for the station (or owned and affiliated stations in the case of networks). The audience factor for television or radio programming shall be determined by the ratio that the taxpayer's in-state viewing (listening) audience bears to its total viewing (listening) audience. The audience factor shall be determined either by reference to the books and records of the taxpayer or by reference to published rating statistics, provided the method used by the taxpayer is consistently used from year to year for this purpose and fairly reflects the taxpayer's activity in Hawaii.

(B) Gross receipts from film programming in release to or by a cable television system shall be attributed to Hawaii in the ratio (hereafter "audience factor") that the subscribers for such cable television system located in Hawaii bears to the total subscribers of such cable television system. If the number of subscribers cannot be accurately determined from the books and records maintained by the taxpayer, the audience factor ratio shall be determined on the basis of the applicable year's subscription statistics located in published surveys, provided that the source selected is consistently used from year to year for that purpose.

(C) Receipts from the sale, rental, licensing, or other disposition of audio or video cassettes, discs, or similar media intended for home viewing or listening shall be included in the sales factor as provided in sections 235-36 and 235-37, HRS, and the rules thereunder.

Haw. Code R. § 18-235-38-06.04

[Eff 7/25/98] (Auth: HRS §§ 231-3(9), 235-38, 235-118) (Imp: HRS § 235-38)