Hawaii general excise/sales and use tax guide

Hawaii does not have a traditional sales tax. Instead, the state imposes a General Excise Tax (GET) on businesses for the privilege of conducting business activities in Hawaii. The general GET rate is 4% for many retail transactions and other business activities. In addition, certain Hawaii counties impose a county surcharge on the GET, which can increase the effective rate for applicable transactions. For many retail sales, the combined state and county rate is generally 4% or 4.5%, depending on the location of the business activity.

Hawaii’s General Excise Tax (GET) is imposed on businesses for a broad range of activities, including retail sales of tangible personal property and many services. The business is legally responsible for reporting and paying the tax to the Hawaii Department of Taxation, although businesses may generally pass the cost of the tax on to customers, subject to applicable rules. GET is administered by the Hawaii Department of Taxation (DOTAX).

If you pass the cost of Hawaii’s General Excise Tax on to your customers, you must properly account for those amounts and remit the tax due to the Hawaii Department of Taxation. Businesses are responsible for maintaining accurate records, filing required returns, and paying GET and any applicable county surcharge on time. Failure to comply with Hawaii tax requirements can result in penalties and interest.

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

Hawaii’s General Excise Tax applies to businesses engaged in taxable business activities in the state. A business does not necessarily need a traditional physical location in Hawaii to have GET obligations. Hawaii’s rules can apply to certain out-of-state businesses based on their business activities and economic connection to the state.

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 Hawaii: Storing inventory or other property in Hawaii for sale may create Hawaii GET obligations. Businesses using Fulfillment by Amazon (FBA) should monitor where their inventory is stored and determine whether the presence of inventory in Hawaii creates registration, filing, or tax obligations.

Marketplace sales: Hawaii requires certain marketplace facilitators to collect and remit applicable General Excise Tax on facilitated sales. Marketplace sellers should not assume that using a marketplace eliminates all of their Hawaii tax obligations. Sellers may still need to register, file returns, and pay GET on other Hawaii business activities or sales not covered by the marketplace facilitator’s collection obligation.

Non-collecting marketplace or forum providers: Hawaii has rules that may impose notice and reporting obligations on certain non-collecting persons that provide a physical or electronic forum where sellers list or advertise tangible personal property and where sales orders are taken or processed. Businesses that fall within these rules should review current Hawaii Department of Taxation requirements to determine whether they must provide purchaser notices, transaction notices, or information reports. Depending on the circumstances, non-collecting forum providers may have notice and reporting obligations, which can include providing purchasers with information about their Hawaii use tax obligations and submitting required transaction information to the Hawaii Department of Taxation. Businesses should consult current Department of Taxation guidance for the applicable requirements and deadlines.

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 and conventions: Participating in a trade show or convention in Hawaii may create Hawaii GET obligations depending on the business’s activities. Businesses that conduct taxable business activities, such as making sales or otherwise engaging in business in Hawaii, may be required to obtain a GET license, file periodic returns such as Form G-45, and pay the applicable tax. Simply attending a convention or trade show without engaging in taxable business activity does not necessarily create a GET obligation.

For more information, review current guidance from the Hawaii Department of Taxation, Hawaii Revised Statutes Chapter 237, applicable administrative rules, and current guidance concerning remote sellers and marketplace facilitators.

Trailing nexus

Some states have rules that allow tax nexus to continue for a specific period after a business stops operating in the state. Hawaii does not have a specific statutory trailing-nexus period for General Excise Tax (GET).

Fulfillment by Amazon (FBA)

If you use Fulfillment by Amazon (FBA), you should know where your inventory is stored because having inventory in Hawaii may create General Excise Tax (GET) obligations. FBA sellers can use Amazon Seller Central’s Inventory Event Detail Report to identify where inventory is stored.

If you have inventory stored in Hawaii, you may have a Hawaii GET registration, filing, and payment obligation. Because GET rules can vary based on your business activities, consider consulting a tax professional about your specific circumstances. Get started suing Avalara’s free economic nexus tool.

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 does not use a destination-based sales tax system. Instead, businesses must apply Hawaii’s GET rules based on the type of business activity and applicable sourcing provisions. For many retail transactions, the 4% state GET rate applies, with a county surcharge potentially increasing the effective rate depending on the location of the business activity.

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
• 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).

Hawaii is not an SST member state.

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: Certain marketplace facilitators, including qualifying platforms, may be responsible for collecting and remitting applicable Hawaii taxes on facilitated transactions. However, marketplace sellers should not assume that using a marketplace eliminates their own Hawaii GET registration or filing obligations. Check your marketplace’s current tax policies and consult the Hawaii Department of Taxation regarding your specific responsibilities.

Mobile point of sale: Mobile POS systems can help businesses calculate Hawaii GET and any applicable surcharge, but the correct tax treatment depends on the type of business activity and applicable sourcing rules. Businesses should configure their systems using current Hawaii GET requirements rather than relying solely on GPS or the customer’s location.

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.

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

Excise tax-free weekends

Tax-free weekends are offered in many states where certain products, like back-to-school items, are exempt from sales tax.

Hawaii does not have any tax-free weekends or sales tax holidays.

Once you’re registered with the Hawaii Department of Taxation, you must file the required GET returns and pay any tax due by the applicable deadlines.

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 involves reporting your gross income and applicable business activities for the reporting period, calculating the GET and any applicable county surcharge, and paying the amount due to the Hawaii Department of Taxation. The information required depends on the type of business activity and the applicable tax return.

Taxpayers who have an estimated annual GET liability over $4,000 must file online using the Hawaii Tax Online (HTO) portal. For more information on filing see the State of Hawaii Department of Taxation – Hawaii General Excise Tax (GET) webpage.

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 sales tax automation software like Avalara AvaTax. 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.”

Failing to file a required return can result in penalties. Interest may also apply to unpaid tax liabilities.

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.

Hawaii does not generally offer a discount on General Excise Tax for filing or paying on time.

It’s important to know your Hawaii General Excise Tax (GET) filing deadlines. Failure to file or pay on time may result in penalties and interest.

Periodic GET returns (Form G-45) and any tax due are generally due by the 20th day of the month following the reporting period. Depending on your tax liability, you may file monthly, quarterly, or semiannually.

The annual GET return (Form G-49) is generally due by the 20th day of the fourth month after the taxable year ends. For calendar-year taxpayers, this is generally April 20.

If a due date falls on a weekend or legal holiday, the deadline generally moves to the next business day.

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.

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 acquiring a business in Hawaii, conduct tax due diligence and contact the Hawaii Department of Taxation to determine whether the business has outstanding GET liabilities. Depending on the structure of the transaction, a purchaser may have successor liability for certain unpaid taxes. Buyers should determine their potential liability and obtain appropriate documentation before completing the acquisition.

If you operate a business in Hawaii, you’ll need to determine how Hawaii General Excise Tax (GET) applies to shipping, delivery, and other charges associated with your business activities.

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 more information, see the State of Hawaii Department of Taxation – Hawaii General Excise Tax (GET) webpage.