Hawaii sales / general excise tax guide

All you need to know about sales tax in the Aloha State

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Introducing our Sales Tax Automation 101 series. The first installment covers the basics of sales tax automation: what it is and how it can help your business.

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Sales tax 101

Sales tax is a tax paid to a governing body (state or local) on the sale of certain goods and services. While technically Hawaii does not have a sales tax, there is a 4 percent general excise tax (GET). On top of the state tax rate, there may be one or more local taxes, as well as one or more special district taxes, each of which can range between 0 percent and .5 percent. Currently, combined general excise tax rates in Hawaii range from 4 percent to 4.5 percent, depending on the location of the sale.

General excise tax (GET) is levied on a business for the sale of tangible goods and some services. The tax is charged to the seller and remitted to state tax authorities. Sellers may choose to pass the charge on to customers. GET in Hawaii is administered by the Hawaii Department of Taxation (DOTAX).

Any GET collected from customers belongs to the state of Hawaii, not you. It’s your responsibility to manage the taxes you collect to remain in compliance with state and local laws. Failure to do so can lead to penalties and interest charges.

General excise tax nexus

The need to pay GET in Hawaii is predicated on having a significant connection with the state. This is a concept known as nexus. Nexus is a Latin word that means "to bind or tie," and it’s the deciding factor for whether the state has the legal authority to require your business to file and remit GET.

Nexus triggers

Sales tax nexus in all states used to be limited to physical presence: Hawaii could require a business to register and remit general excise tax only if it had a physical presence in the state, such as employees or an office, retail store, or warehouse.

In June 2018, the Supreme Court of the United States overruled the physical presence rule with its decision in South Dakota v. Wayfair, Inc. States are now free to tax businesses based on their economic and virtual connections to the state, or economic nexus.

While physical presence still triggers a GET obligation in Hawaii, it’s now possible for out-of-state sellers to have general excise tax nexus with Hawaii.

Out-of-state sellers

Out-of-state sellers with no physical presence in a state may establish nexus in the following ways:

Affiliate nexus
: Having ties to businesses or affiliates in Hawaii. This includes, but isn’t limited to, the design and development of tangible personal property (goods) sold by the remote retailer, or solicitation of sales of goods on behalf of the retailer.

Click-through nexus: Having an agreement to reward a person(s) in the state for directly or indirectly referring potential purchasers of goods through an internet link, website, or otherwise. At this time, Hawaii has not enacted a click-through nexus law.

Economic nexus: Having a certain amount of economic activity in the state. For sales made on and after July 1, 2018, a remote seller must register with the state then remit Hawaii GET if the remote seller meets either of the following criteria (the economic thresholds):

  • Gross revenue from Hawaii sales of $100,000 or more; or
  • 200 or more separate transactions in the current or previous year

Inventory in the state: Storing property for sale in the state. This includes merchandise owned by Fulfillment by Amazon (FBA) merchants and stored in Hawaii in a warehouse owned or operated by Amazon.

Marketplace sales: Making sales through a marketplace. Effective January 1, 2020, marketplace facilitators will be responsible for collecting and remitting GET on behalf of marketplace sellers in Hawaii.

Non-collecting seller use tax reporting: Effective January 1, 2020, Hawaii will require use tax notice and reporting by “any person other than a marketplace facilitator who provides a forum, whether physical or electronic, in which sellers list or advertise tangible personal property for sale and takes or processes sales orders.” Requirements include:

  • Posting a conspicuous notice on the forum informing potential purchasers that they’re required to pay Hawaii use tax on sales made through unlicensed sellers
  • Providing a written notice at the time of sale that the purchaser may be required to remit use tax directly to the tax department, along with instructions on how to obtain additional information

Additionally, non-collecting forum providers would have to send an annual report to the Hawaii Department of Taxation with the following information for each purchaser of tangible personal property delivered into Hawaii:

  • The name and address (billing and mailing) of the purchaser
  • The Hawaii address where tangible personal property was delivered to the purchaser
  • The aggregate dollar amount of the purchaser’s purchases
  • The name and address of the seller (not the forum provider)

If a seller opts to collect and remit tax in Hawaii, the non-collecting forum provider would be relieved of the use tax notice and reporting requirements on that seller’s sales.

Trade shows: Businesses attending conventions or trade shows in Hawaii may be required to register with Form G-45. You may be liable for collecting and remitting Hawaii GET on orders taken or sales made during Hawaii conventions or trade shows.

For more information, see Hawaii Department of Taxation Announcement No. 2018-10, Hawaii State Taxes Chapter 237, and Administrative Rules.

Trailing nexus

Nexus can linger even after a retailer ceases the activities that caused it to be “engaged in business” in the state. This is known as trailing nexus. As of June 2019, Hawaii does not have an explicitly defined trailing nexus policy.

Fulfillment by Amazon (FBA)

If you’re an active Amazon seller and you use Fulfillment by Amazon (FBA), you need to know where your inventory is stored and if its presence in a state will trigger nexus. FBA sellers can also download an Inventory Event Detail Report from Amazon Seller Central to identify inventory stored in Hawaii.

If you sell taxable goods to Hawaii residents and have inventory stored in the state, you likely have nexus and an obligation to remit tax. To begin to understand your unique nexus obligations, check out our free economic nexus tool or consult with a trusted tax advisor.

Sourcing general excise tax in Hawaii: which rate to collect

In some states, tax rates, rules, and regulations are based on the location of the seller and the origin of the sale (origin-based sourcing). In others, tax is based on the location of the buyer and the destination of the sale (destination-based sourcing).

Hawaii is a destination-based state. This means you’re responsible for the rate determined by the ship-to address on all taxable sales.

Getting registered

After determining you have nexus in Hawaii, you need to register with the proper state authority and file and remit general excise tax to the state. We get a lot of questions about this and recognize it may be the most difficult hurdle for businesses to overcome. Avalara Licensing can help you obtain your Hawaii business license and GET registration.

How to register for a Hawaii tax license

You can register for a Hawaii tax license online through DOTAX. To apply, you’ll need to provide DOTAX with certain information about your business, including but not limited to:

  • Business name, address, and contact information
  • Federal EIN number
  • Date business activities began or will begin
  • Projected monthly sales
  • Projected monthly taxable sales
  • Products to be sold

Cost of registering for a Hawaii tax license

The cost to register for a tax license in Hawaii is $20.

Acquiring a registered business

You must register with the Hawaii Department of Taxation if you acquire an existing business in Hawaii. The state requires all registered businesses to have the current business owner’s name and contact information on file.

Streamlined Sales Tax (SST)

The Streamlined Sales and Use Tax Agreement (SSUTA), or Streamlined Sales Tax (SST), is an effort by multiple states to simplify the administration and cost of sales tax for remote sellers. Remote sellers can register in multiple states at the same time through the Streamlined Sales Tax Registration System (SSTRS).

As of June 2019, Hawaii is not an SST member state.

Collecting general excise tax

Once you've successfully registered for Hawaii GET, you'll need to decide whether to pass that tax on to your customers, and if so, determine and apply the correct rate. Regardless of what you decide, you will be responsible for remitting GET, filing timely returns with the Hawaii Department of Taxation, and keeping excellent records. Here’s what you need to know to keep everything organized and in check.

How you collect Hawaii general excise tax is influenced by how you sell your goods:

Brick-and-mortar store
: Have a physical store? Brick-and-mortar point-of-sale solutions allow users to set the GET rate associated with the store location. New tax groups can then be created to allow for specific product tax rules.

Hosted store: Hosted store solutions like Shopify and Squarespace offer integrated tax rate determination and collection. Hosted stores offer sellers a dashboard environment where Hawaii GET collection can be managed.

Marketplace: Marketplaces like Amazon and Etsy offer integrated tax rate determination and collection, usually for a fee. As with hosted stores, you can set things up from your seller dashboard and let your marketplace provider do most of the heavy lifting.

Mobile point of sale: Mobile point-of-sale systems like Square rely on GPS to determine sale location. The appropriate tax rate is then determined and applied to the order. Specific tax rules can be set within the system to allow for specific product tax rules.

Hawaii GET collection can be automated to make your life much easier. Avalara AvaTax seamlessly integrates with the business systems you already use to deliver general excise tax calculations in real time.

Tax-exempt goods

Some goods are exempt from GET under Hawaii law. Examples include purchases made with food stamps, prescription drugs, and medical supplies.

We recommend businesses review the laws and rules put forth by the Hawaii Department of Taxation to stay up to date on which goods are taxable and which are exempt, and under what conditions.

Tax-exempt organizations

Some organizations are exempt from paying GET under Hawaii law. Examples include government agencies, some nonprofit organizations, and fraternal orders.

General excise tax holidays

Tax holidays exempt specific products from tax for a limited period, usually a weekend or a week. Approximately 17 states offer sales tax holidays every year.

As of June 2019, however, there are no GET holidays in Hawaii.

Filing and remittance

Once you're registered with the Hawaii Department of Taxation and owe general excise taxes, here are the main steps toward filing you're obligated to complete.

How to file

You’re required to remit all GET to the Hawaii Department of Taxation by a certain date. DOTAX will then distribute it appropriately.

Filing a Hawaii GET return is a two-step process comprised of submitting the required sales data (filing a return) and remitting the collected tax dollars (if any) to DOTAX. The filing process forces you to detail your total sales in the state, the amount of GET owed, and the location of each sale.

The Hawaii G-45 and G-49 forms are available online for download. However, taxpayers are encouraged to file electronically via the Hawaii Tax Online portal.

Filing frequency

The Hawaii Department of Taxation will assign you a filing frequency. Typically, this is determined by the size or sales volume of your business. State governments generally ask larger businesses to file more frequently. See the filing due dates section for more information.

Hawaii general excise tax returns and payments must be remitted at the same time; both have the same due date.

Online filing

You may file directly with DOTAX by visiting their site and entering your transaction data manually. This is a free service, but preparing Hawaii GET returns can be time-consuming — especially for larger sellers.

Using a third party to file returns

To save time and avoid costly errors, many businesses outsource their GET filing to an accountant, bookkeeper, or tax automation company like Avalara. This is a normal business practice that can save business owners time and help them steer clear of costly mistakes due to inexperience and a lack of deep knowledge about Hawaii general excise tax code.

Filing when there are no sales

Once you have a Hawaii tax license, you’re required to file returns at the completion of each assigned collection period regardless of whether any GET is due. When no GET is due, you must file a "zero return.”

Failure to submit a zero return can result in penalties and interest charges.

Closing a business

DOTAX requires all businesses to "close their books" by filing a final general excise tax return. This also holds true for business owners selling or otherwise transferring ownership of their business.

Timely filing discount

Many states encourage the timely or early filing of GET returns with a timely filing discount.

As of June 2019, DOTAX does not offer GET filers a discount.

Filing due dates

It's important to know the due dates associated with the filing frequency assigned to your business by the Hawaii Department of Taxation. This way you'll be prepared and can plan accordingly. Failure to file by the assigned date can lead to late fines and interest charges.

DOTAX requires all monthly and quarterly GET filing to be completed by the 20th day of the month following the tax period. Annual filing must be completed by the 20th day of the fourth month following the tax year. Below, we've grouped Hawaii general excise tax filing due dates by filing frequency for your convenience. Due dates falling on a weekend or holiday are adjusted to the following business day.

Hawaii 2019 monthly filing due dates

Reporting periodFiling deadline
JanuaryFebruary 20, 2019
FebruaryMarch 20, 2019
MarchApril 22, 2019
AprilMay 20, 2019
MayJune 20, 2019
JuneJuly 22, 2019
July August 20, 2019
AugustSeptember 20, 2019
SeptemberOctober 21, 2019
OctoberNovember 20, 2019
NovemberDecember 20, 2019
DecemberJanuary 21, 2020

Hawaii 2019 quarterly filing due dates

Reporting periodFiling deadline
Q1 (January 1–March 31)April 22, 2019
Q2 (April 1–June 30)July 22, 2019
Q3 (July 1–September 30)October 21, 2019
Q4 (October 1–December 31)January 21, 2020

Hawaii 2019 semi-annual filing due dates

Reporting periodFiling deadline
H1 (January 1–June 30)July 22, 2019
H2 (July 1–December 31)January 21, 2020

Hawaii 2019 annual filing due date

Reporting periodFiling deadline
January 1–December 31April 20, 2020

Late filing

Filing a Hawaii GET return late may result in a late filing penalty as well as interest on any outstanding tax due. For more information, refer to our section on penalties and interest.

In the event a Hawaii GET filing deadline was missed due to circumstances beyond your control (e.g., weather, accident), DOTAX may grant you an extension. However, you may be asked to provide evidence supporting your claim.

Penalties and interest

Hopefully you don't need to worry about this section because you're filing and remitting Hawaii GET on time and without incident. However, in the real world, mistakes happen.

If you miss a general excise tax filing deadline, follow the saying, “better late than never,” and file your return as soon as possible. Failure to file returns and remit tax on time may result in penalties and interest charges, and the longer you wait to file, the greater the penalty and the greater the interest.

If you’re in the process of acquiring a business, it’s strongly recommended that you contact DOTAX and inquire about the current status of the potential acquisition. Once you've purchased the business, you’ll be held responsible for all outstanding Hawaii GET liability.

Shipping and handling

If you’re collecting GET from Hawaii residents, you’ll need to consider how to handle taxes on shipping and handling charges.

Taxable and exempt shipping charges

Hawaii GET generally applies to charges for shipping, delivery, freight, and postage on taxable sales.

There are exceptions to almost every rule with general excise tax, and the same is true for shipping and handling charges. Specific questions on shipping in Hawaii and GET should be taken directly to a tax professional familiar with Hawaii tax laws.

For additional information, see Hawaii’s Introduction to General Excise Tax.

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