Hawaii Sales Tax
Hawaii Sales Tax At a Glance
State rate: 4%
Maximum combined rate: 4.5%
Tax Holidays: None
Governing Body: Hawaii Department of Taxation
Hawaii doesn’t technically impose a sales tax. What it does have, however, is a General Excise Tax (GET), which applies to transactions involving goods and services conducted within the state at all levels. So, if you’re starting a small business or expanding to include Hawaii in your company’s service area, it’s important to understand how the GET works and how it may apply to you.
Hawaii Sales Tax Rates
The GET rate in Hawaii is 4% on retail sales, with an additional 0.5% local sales tax added in Oahu County, Kauai County, and Hawaii County in the form of a county surcharge. Wholesale transactions are taxed at a rate of 0.5% statewide. What makes the GET different from a traditional sales tax is that it’s a tax on the business selling the goods or providing the service rather than on the purchaser.
The seller is permitted to pass on the tax to the consumer, however, with a maximum of 4.166% charged to the consumer in areas where the effective GET rate is 4%, and a maximum of 4.712% where the rate the seller pays is 4.5%. Small businesses must explicitly inform customers that they are passing on the GET in this way.
Nexus Regulations in Hawaii
Businesses are not obligated to pay the GET unless they have established a physical or economic nexus, a significant business presence, in Hawaii. For out-of-state sellers, GET payments are only due on a particular purchase if delivery is made in Hawaii and the seller has a nexus there. A business is considered to have a nexus if they:
- Have property in the state
- Provide services in the state
- Acquire a presence in the state for any period of time
- Are incorporated in the state
- Have a local phone number in the state
- Store goods in the state
Voluntarily registering to pay the GET may also create a nexus condition for a business depending on the specific circumstances of their situation.
Economic nexus is established in Hawaii if a business does $100,000 or 200 or more transactions with people in Hawaii. This applies to gross sales for individual businesses and marketplace sales for facilitators.
The GET applies to all retail sales of tangible personal property and services, with few exceptions. These exceptions include prescription drugs in some instances, as well as some medical devices, and all sales to the federal government are exempt. Overall, though, any item purchased at retail is subject to a GET charge being added to it.
The 0.5% GET rate that applies to wholesaling also covers manufacturing, producing, providing wholesale services, and the business activities of disabled people. There is a 0.15% tax rate for insurance commission as well. In addition to retail sales, the 4% GET rate applies to other business activities, including renting, leasing real property, construction contracting, and earning commissions.
When it comes to providing services, any that are performed in Hawaii are subject to the GET even if the company doing the work or providing the workers is based elsewhere. The GET does not apply, however, to goods shipped by a Hawaii-based company to a customer in another state or country, however, the state or country to which those items are shipped may have economic nexus laws of their own that you should be aware of.
Registration and Filing
You must apply for a GET license before you can begin doing business in Hawaii to ensure tax compliance. This can be done in person or by mail by filling out the State of Hawaii Basic Business Application BB-1 Packet that can be found on the state tax website. You can also apply online directly through the Hawaii Business Express portal. There is a one-time fee to apply of $20, and the license does not need to be renewed.
If you apply by mail, you should receive your license in the mail in 10-15 days. If you apply online, you’ll receive an email containing your license number 3-5 days after making your submission. A physical license will arrive in the mail shortly thereafter. At the time that you apply, your filing frequency will be assigned based on your estimated annual tax liability. If this amount changes, however, you must modify your filing frequency by first notifying the state and then filing the appropriate return.
In general, you will file your GET returns on a semi-annual basis if your annual tax compliance liability is $2,000 or less. If you have an annual tax liability of between $2,000 and $4,000, you will file quarterly, and an annual liability of over $4,000 will mean you are assigned monthly filing status. You can file your returns online through the state tax website or by mail.
Due Dates and Penalties
Regardless of your method of filing or your filing frequency, your GET returns will be due on the 20th of the month following the close of the period in question. For annual filers, that will mean a due date of January 20th of the following year. If the due date falls on a weekend or holiday, it is pushed back to the next business day.
Monthly Due Dates
Quarterly Due Dates
|January – March (Q1)||April 20|
|April – June (Q2)||July 20|
|July – September (Q3)||October 20|
|October – December (Q4)||January 20|
Failure to file and pay on time will result in a penalty of 5% of the total tax due per month or part of the month that your payment is delinquent, up to a maximum of 25%. Interest is also added to your balance at a rate of 0.66% per month.
Hawaii Sales Tax Software
Whether your company is based in Hawaii or you simply do regular business there, you will need to keep track of all of your sales transactions that are subject to the GET in order to remain compliant and to keep your account in good standing with the state. This can be a challenge, particularly if you do business in multiple states, as the specific requirements for establishing nexus and determining what is and isn’t taxable can vary a great deal from one state to another.
TaxTools can significantly ease that burden, however, thanks to the impressive array of features it provides to help you manage your GET tax payments and record-keeping. This suite of software can provide up-to-date reports complete with location information for all of your sales, and it makes filing your returns as easy as possible as well. It also integrates smoothly with all ecommerce platforms, so no matter how you reach your customers, TaxTools can help you keep your business running smoothly.
If you’re ready to learn more about how TaxTools can streamline your tax tracking and reporting processes, both in Hawaii and elsewhere, click here to sign up for a free trial today.
Last updated January 2023