Hawaii Tax Nexus
Businesses with nexus in Hawaii are required to register with the Hawaii Department of Taxation and to charge, collect, and remit the appropriate tax.
Instead of sales tax, Hawaii imposes on individuals and businesses a general excise tax (GET) on the gross receipts or gross income derived from their business activities in the state.
Generally, a business has nexus in Hawaii when it has a physical presence there, such as a retail store, warehouse, inventory, or the regular presence of traveling salespeople or representatives. However, out-of-state sellers can also establish nexus in the ways described below.
Hawaii nexus for out-of-state sellers
An out-of-state business establishes nexus in Hawaii by having a sufficient presence in the state and carrying on activities that are sufficiently connected with its ability to establish or maintain a market for its products in Hawaii. Presence is determined by numerous factors, including but not limited to the following:
- Providing services in conjunction with the sale of property, such as training, installation, or repairs
- Furnishing personal or other services in Hawaii
- Leasing tangible personal property located in Hawaii
If your business has ties to businesses in Hawaii, including affiliates, it may trigger nexus. In a 2010 Letter Ruling, the Hawaii Department of Taxation determined that a merchandise exchange by an out-of-state seller’s in-state affiliate did create nexus for the remote vendor, in spite of the fact that the out-of-state seller did not itself have a physical presence in Hawaii.
Out-of-state businesses are encouraged to contact the Hawaii Department of Taxation or a tax expert regarding their specific circumstances.