Hawaii Sales Tax Guide 2024: Compliance, Rates, and Regulations for Businesses

Hawaii sales tax at a glance

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Hawaii GET rates & calculations in 2023

Hawaii imposes a general excise tax (GET) on business gross income. The base GET rate is 4% statewide.

Additionally, Hawaii's 4 counties can impose a county surcharge of up to 0.5% on top of the 4% state tax.

Hawaii GET Rates & Calculations

Here are the current GET rates by county in Hawaii as of 2023:

List of county surcharge rates in Hawaii:

• Oahu (City & County of Honolulu): 4.7120%
• Hawaii County (Big Island): 4.4386%
• Maui County (Maui, Molokai, Lanai): 4.7120%
• Kauai County: 4.7120%

You can look up the full table of GET rates by county and district here. The 2023 Hawaii GET rate ranges from 4% to 4.7%, depending on which county products or services are sold.

FAQs

How do you calculate Hawaii GET?

Hawaii GET is complex compared to traditional sales tax because businesses pay the tax on their gross earnings. Taxable businesses must calculate GET due on all taxable income earned, even on sales made to other businesses.

The GET formula is:

GET Due = (Taxable gross income x GET Rate)

There are allowable exemptions, deductions, and credits that can reduce the GET owed. But in general, businesses apply the appropriate county GET rate to all gross revenue.

Additionally, wholesalers and manufacturers pay a 0.5% GET rate on their gross income when making wholesale sales for resale to other businesses. Retailers then owe 4% GET when reselling those goods to final consumers in a given Hawaii county.

What are the penalties for not paying Hawaii GET?

Penalties for late filing or nonpayment are 5% per month, up to 25% of the taxes owed. Interest charges may also apply.

Is Hawaii a destination-based or origin-based GET state?

Hawaii imposes GET based on the destination of the sale, meaning the location where the product or service is delivered. So, sellers must charge the GET rate associated with the buyer's location.

Is Hawaii a streamlined sales tax state?

No, Hawaii is not a Streamlined Sales Tax state.

GET nexus thresholds in Hawaii

Type of nexus

Threshold

Physical presence

Any physical presence

Economic nexus

$100,000 in sales or 200 transactions

FAQs

Do I need a Hawaii seller's permit if I’m only a wholesaler?

Yes, wholesale sellers are still required to register for a Hawaii GET license even if they do not directly make retail sales to end consumers. The reason is that Hawaii imposes a 0.5% GET rate specifically on wholesale transactions—when a wholesaler sells goods to a retailer for resale.

Wholesalers and manufacturers selling to Hawaii resellers must register and pay a reduced 0.5% GET rate even if they have no presence in Hawaii. The retailers then collect 4% GET when selling those goods to Hawaii consumers.

Do I need a Hawaii seller's permit if I only sell temporarily in the state?

Yes, out-of-state sellers making temporary sales trips or selling at short-term events in Hawaii still must meet registration requirements if they exceed nexus thresholds.

In both cases, these sellers from outside Hawaii must register for GET licenses in advance and collect applicable general excise taxes on their sales completed during their temporary stay in Hawaii. The same goes for attending conventions and trade shows - crossing either economic nexus threshold from short-term sales trips obligates temporary sellers to register and charge Hawaii GET.

What's exempt from sales tax in Hawaii

Some exemptions include:

• Sales of exempt farm equipment and machinery
• Sales of ships & aircraft for interstate transport
• Sales of materials and supplies used in agricultural production
• Sales to federal government agencies

FAQs

Are groceries taxable in Hawaii?

While most grocery food items are exempt from Hawaii's GET if sold via grocery stores, bakeries, etc, some prepared foods sold on the seller's premises are taxable.

Is clothing taxable in Hawaii?

Yes, clothing and accessories are taxable under Hawaii's GET. Exceptions include specialty clothing like medical wear, helmets, wet suits, etc.

Are digital products taxable in Hawaii?

Yes. Hawaii taxes digital products like software, ebooks, music downloads, etc. There are some exemptions for electronically delivered software used by other businesses.

Is software-as-a-service (SaaS) taxable in Hawaii?

Yes, Hawaii generally taxes SaaS services. Custom software can qualify for exemption under certain conditions.

Are services taxable in Hawaii?

Yes. Hawaii's GET applies very broadly to services as well as goods. Some exemptions apply to medical, agricultural, shipping, and non-profit services.

Collecting GET in Hawaii

Collecting the proper Hawaii GET from customers is crucial for businesses to remain compliant. GET obligations apply both to sellers located in Hawaii as well as out-of-state sellers who meet remote nexus thresholds.

How remote sellers must collect Hawaii GET

If an online business or other remote seller meets the $100,000 annual sales or 200 transaction nexus rules for Hawaii, they must take the following steps:

1. Register for a Hawaii GET license through the Hawaii Tax Online (HTO) system. This will provide a Hawaii Tax ID number to support tax collections.
2. Set up accounting software or a sales tax management system to reliably determine Hawaii GET rates based on customer shipping addresses. Hawaii is a destination-sourcing state, so the buyer's location dictates which county's GET rate applies to any order.
3. Charge the applicable Hawaii GET during checkout and document it on customer sales invoices. This is typically 4% for the base state tax plus a 0.5% county surcharge if shipping to Oahu or Kauai counties.
4. Issue receipt emails to customers showing Hawaii GET broken out separately from any other taxes or shipping fees.
5. Maintain Hawaii sales records with GET details to support tax return reporting.

Should remote sellers collect Hawaii GET on shipping charges?

Yes, if a remote seller meets Hawaii economic nexus thresholds, any shipping and handling fees associated with taxable sales must also have GET collected. There is one exception - if part of a shipment contains exempt products, sellers can reasonably estimate the shipping costs associated with the taxable portion only.

Managing Hawaii GET collections

Sellers with physical or economic nexus should use retail point-of-sale systems and ecommerce platforms that reliably apply Hawaii's destination-based GET during transactions.

They can also use sales tax automation tools to accurately calculate rates in real-time across all channels and simplify collecting and remitting Hawaii GET.

Filing and paying GET in Hawaii

All Hawaii businesses with GET obligations must file periodic tax returns to report taxable revenue and calculate the GET due. Returns can be filed online through Hawaii's Tax Online system.

GET payments must be submitted at the same time as return filing. Businesses pay their net GET taxes after deducting certain exemptions.

Hawaii GET return filing schedule and due dates

The Hawaii Department of Taxation assigns each business a monthly, quarterly, or annual filing frequency based on taxable revenue.

Here are the Hawaii GET return due dates for each period:

Monthly:

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Quarterly:

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Annual:

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Filing penalties in Hawaii

Late filing penalties can be up to 25% of the taxes owed. Interest charges may also apply to late GET payments.

When are returns due in Hawaii?

Hawaii GET returns are due on the 20th day of the month after the close of each reporting period.

For example, for a quarterly filer, if the Jan-Mar 2023 period ends on March 31, the return and payment are due by April 20, 2023.

How to register for Hawaii GET

To register, go to the Hawaii Tax Online system (hitax.hawaii.gov). You'll need to provide details like:

• Legal business name & contact info (phone, address, email)
• Federal Employer Identification Number (FEIN) or SSN
• Date Hawaii business activities started/will start
• Ownership structure (sole proprietor, LLC, corporation, etc.)
• Estimated annual gross revenue
• Tax district where business is located
• Business activities and products sold

The registration fee is $20.00, payable during registration through Hawaii Tax Online.

Once registered and approved, you will receive a Hawaii Tax I.D. number and must begin collecting and remitting applicable GET on taxable business transactions.

Registration requirements for online sellers

Remote sellers without a Hawaii physical presence must still register and collect GET if they meet economic nexus thresholds:

• Having over $100,000 in annual Hawaii sales
• Completing 200 or more separate sales transactions delivered to Hawaii

Using a Hawaii-based marketplace facilitator like Amazon or eBay to make sales can also obligate remote sellers to register for and collect Hawaii GET.

Additionally, keeping inventory in Hawaii warehouses to fulfill remote sales may trigger GET registration requirements even without meeting the sales thresholds.

Meeting these thresholds requires remote sellers to set up Hawaii tax accounts and comply with GET obligations. They will need to charge and remit GET just like sellers located in Hawaii.

Audit & Appeals Process for Hawaii GET

If a business is selected for a Hawaii GET tax audit, there is a process they must follow, including potential appeals if they dispute the audit findings.

Hawaii GET audit process

1. The auditor contacts the business to schedule the audit. This usually begins with an initial appointment and information request.
2. During the audit, the auditor thoroughly reviews the business's financial records, GET tax returns, exemption certificates, and source documents like invoices and bank statements. They examine these records to verify that taxable revenue, deductions, and exemptions were all reported entirely and accurately.
3. After concluding their review, the auditor issues an audit assessment outlining any additional GET tax calculated as owed, plus any penalties and interest. Common discrepancies in Hawaii GET audits include underreported taxable sales or services, overstated exemptions, unsubstantiated deductions, failure to file returns, errors calculating taxes due, and more.
4. They can appeal the assessment if the business disagrees with the audit findings. The first appeal is made to a Hawaii Department of Taxation supervisor. Additional hearings may also be scheduled to present evidence supporting the business's position.
5. If the initial department appeal is denied, the business can pursue further appeals to administrative tax appeals officers, following Hawaii's Tax Court system. They can submit documentation at each stage and explain why the assessment is inaccurate or should be adjusted.

What to expect during a Hawaii GET audit

In the initial audit appointment, the auditor typically discusses the scope of records they want to review and establishes a timeline for providing the information. Multiple meetings and information requests may occur before the auditor has gathered enough documentation and details to assess.

The business should be prepared to provide comprehensive financial statements and tax records like:

• Hawaii GET returns
• Sales invoices, receipts, and transaction reports
• Bank account statements
• Inventory/cost of goods sold details
• Exemption certificates and logs
• Accounting system data

Appealing Hawaii GET audit results

If disputes arise over the auditor's findings and assessment, the business always has the right to contest the results through appeals. The appeals process enables them to:

• Avoid immediate payment demands for the disputed amounts
• Provide documentation that helps prove their position
• Have additional hearings to explain their situation
• Potentially reduce penalties imposed
• Negotiate payment plans if other taxes are still owed

Thoroughly contesting questionable audit assessments often helps resolve business issues or at least reduces the financial implications.

Cost of registration for a Hawaii GET license

The cost to register for a Hawaii GET license through the Hawaii Tax Online system is a one-time $20.00 registration fee.

Agencies to register within Hawaii

Businesses must only register directly with the Hawaii Department of Taxation to obtain a GET license. There are no additional agency registrations.

More Information & Contacts for Hawaii GET

For help with Hawaii GET questions, filing returns or making payments, registering a business, understanding nexus rules, and managing audits or appeals, contact:

• Authority Name: Hawaii Department of Taxation
• Phone Number: (808) 587-4242
• Website: tax.hawaii.gov

There you have it—a comprehensive guide on Hawaii's sales tax rules and regulations. Need help filing taxes for your ecommerce store? Get a demo with Numeral now.