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The Ultimate Guide To Hawaii Sales Tax

Welcome to our handy guide on Hawaii sales tax. We'll walk you through everything you need to know, from the specific sales tax rates in different counties and cities across Hawaii to answering some of the most common questions. Plus, we'll guide you on how to efficiently collect and file your sales tax in Hawaii.

Sales Tax Rate

4.00%

Local Rate?

Yes

Website

Hawaii Department of Taxation

Sales Threshold

$100,000

Tax Line

(808) 587-4242

Transactions Threshold

200

What is Nexus?

You'll need to collect sales tax in Hawaii if you have nexus there. There are two main ways that sellers can be tied to a state when it comes to nexus: physical, or economic.

Physical nexus means having enough tangible presence, or activity in a state to merit paying sales tax in that state.

Economic nexus means passing a states' economic threshold, for total revenue, or the number of transactions in that state.

Calculating Nexus in Hawaii

Physical Nexus

If you have a physical presence like a store, office, or warehouse, that's a physical nexus. Employees in Hawaii? That's another sign. Storing products in a local warehouse or owning property? More signs. Even regular business visits to Hawaii can establish a physical nexus.

Economic Nexus

No matter where you are, if your business makes $100,000 in sales or has 200 transactions with Hawaiian customers in a year, you've got an economic nexus.

Affiliate Nexus

If you have an affiliate in Hawaii participating in a mutual merchandise return and loyalty points program with your business, that's an affiliate nexus. The Hawaii Department of Taxation sees this as doing business in Hawaii, requiring you to collect and remit sales tax on sales to Hawaiian residents.

Click-Through Nexus

Good news! Hawaii doesn't have click-through nexus laws. But remember Hawaii's economic nexus law: if you hit $100,000 in sales or 200 transactions in Hawaii, you need to collect and remit sales tax.

Marketplace Nexus

Using a marketplace facilitator to sell in Hawaii? If they hit $100,000 in sales or 200 transactions, they must handle the sales tax, no matter where your business is based.
Did you know logo

Spam is tax-free in Hawaii. It’s the Aloha State’s favorite tax-free treat.

Sales Tax Registration in Hawaii

Steps for Registering to File Sales Tax in Hawaii

  • Gather Your Essentials: Gather key information like your Federal Employer Identification Number (FEIN), Social Security Number (SSN), and business details before starting.
  • Visit the Hawaii Department of Taxation Website: This website is your gateway to all things tax-related in Hawaii. Head over to the business registration section to begin.
  • Complete the BB-1 Packet: This is your crucial step, akin to sending a postcard to Hawaii about your business. It's an online form that's as easy to fill out as ordering a li hing piña colada!
  • Receive Your License: After approval, you'll get your Hawaii General Excise Tax (GET) license, welcoming you into Hawaii's business family.
  • Celebrate and Prep: Once you have your license, it's time to start collecting sales tax. The Hawaii GET is a tax you collect from customers and pass on to the state.

Cost of Registering for a Hawaii Sales Tax License

Registering for a sales tax license in Hawaii costs $20, a fee that's non-refundable. But, if you're a new business, there's good news! You might be eligible for a fee waiver if:
  • Your business is less than a year old.
  • You had less than $50,000 in gross receipts last year.
  • You're a sole proprietorship, partnership, or LLC.
To apply for the waiver, fill out the application and attach a copy of your TIN and most recent income statement. The Hawaii Department of Taxation will get back to you within 30 days.

Do You Need an EIN for a Hawaii Sales Tax License?

Absolutely! Your Federal Tax ID Number or EIN is crucial, much like a passport for your business. This unique number identifies your business to the government.

If you're a sole proprietor, you might use your Social Security Number, but having an EIN is like holding a VIP pass. It's about adding a layer of identity protection and professionalism to your venture.

Other Agencies to Register With in Hawaii

As you set up your business in Hawaii, you might need to register with a few other agencies, depending on your business type:
  • Hawaii Department of Commerce and Consumer Affairs (DCCA): Essential for corporations, LLCs, partnerships, or sole proprietorships with a trade name.
  • Hawaii Department of Labor and Industrial Relations (DLIR): If you have employees, this is your go-to for unemployment insurance and workers' compensation.
  • County Offices: Local permits and licenses might be needed depending on your location.
  • Federal Agencies: Depending on your operations, the IRS or other federal agencies might be on your list.

Guide to collecting sales tax in Hawaii

In Hawaii, we have the General Excise Tax (GET). Whether you're a local business or riding the waves of economic nexus from afar, once you've established nexus, it's time to start collecting.
  1. Know Your Rates: Know your GET rates. Hawaii's state GET rate is 4%, but Oahu adds a 0.5% county surcharge for a total of 4.5%.
  2. Apply GET to Sales: GET likely applies to your business. It's as wide-reaching as Hawaii's ocean.
  3. Include GET in Pricing: GET is a 'gross' tax, applied to your business's gross income. Many businesses choose to include it in their sales prices.
  4. Collect at Point of Sale: Make sure you're collecting the right amount of GET with every sale.
  5. Keep Accurate Records: Track your collected GET like a map to buried treasure. It's crucial for when it's time to file your taxes.
  6. File and Pay On Time: Submit your tax returns and remit the tax on time. Timing, just like catching the perfect wave, is everything!

What Sales are Subject to Sales Tax in Hawaii?

Hawaii's GET covers almost every business activity under its warm, tropical embrace. Here's a look at what's included:
  • Goods: Selling anything tangible, like Hawaiian shirts or ukuleles? They're subject to GET.
  • Services: Earnings from services, from relaxing spa treatments to exhilarating surf lessons, are included.
  • Rentals: Renting out property or vehicles? These transactions fall under GET too.
  • Digital Products: The digital realm is also part of Hawaii's GET family, so digital products like e-books or software are included.
  • Commissions: Earnings from commissions, be it in real estate or art, are subject to GET.
Some transactions, like prescription medicine and specific foods, might have exceptions or different rates. Be sure to consult with a Kintsugi tax expert to keep your dance with GET in perfect rhythm.

Is Software as a Service (SaaS) Taxed in Hawaii?

Yes, SaaS is indeed taxed in Hawaii. Considered a taxable service, SaaS falls under the state's 4.4% General Excise Tax (GET).

The Hawaii Department of Taxation sees SaaS as "a software application hosted by a third party and accessed over the internet." This includes various applications like CRM and accounting software. Recent rulings have clarified that SaaS is subject to GET whether it's licensed or sold to the user, or even if used to access data stored on the user's computer.

If you're a SaaS provider selling to customers in Hawaii, it's important to collect GET and file returns regularly with the Department of Taxation.

Exemptions from Hawaii's GET

Not every transaction is treated equally under the General Excise Tax (GET). Let's explore those special transactions that get to lounge on the beach without the GET tagging along.
  • Prescription Medicine and Prosthetic Devices: These essential health items are exempt from GET, offering a bit of financial relief in healthcare matters.
  • Certain Types of Food: Not all foods are taxed the same. Some, like those bought with food stamps, are exempt from GET.
  • Some Agricultural Items: Selling unprocessed agricultural products grown in Hawaii? They're often exempt, just like finding a fresh papaya in your garden.
  • Certain Nonprofit Organizations: Nonprofits contributing to the community often enjoy GET exemptions on income related to their mission.
  • Some Leases: Depending on their nature, some leases can escape the GET, giving your budget a bit more breathing room.
  • Interstate and Foreign Commerce Sales: Transactions spanning beyond Hawaii's shores may also enjoy exemptions from GET.

Eligibility for Hawaii's Sales Tax Exemptions

To join the exclusive club of Hawaii's sales tax exemptions, here's who might get an invitation:
  • Nonprofit Organizations: Serving the community can come with perks. Nonprofits with 501(c)(3) status may qualify for GET exemptions, but must be approved by the Hawaii Department of Taxation.
  • Certified or Licensed Health Professionals: Those providing prescription medications or prosthetic devices for treatments might be eligible for exemptions.
  • Agricultural Producers: Growing local produce like pineapples? You could be exempt from GET on unprocessed agricultural products.
  • Certified Common Paymaster: Related entities using a common paymaster for payroll might find themselves exempt from GET.
  • Qualified Businesses in Enterprise Zones: Operating in an Enterprise Zone? You could enjoy various benefits, including GET exemptions.

Handling Sales Tax-Exempt Customers in Hawaii

Dealing with a sales tax-exempt customer in Hawaii? Here's your step-by-step guide:
  • Get Proof of Exemption: Ensure you have a valid Hawaii Department of Taxation Form G-17, the Tax Exemption Certificate.
  • Verify the Exemption: Check the certificate thoroughly, like examining a treasure map. Ensure it's current and error-free.
  • Keep a Copy: Hold onto a copy of the certificate, like collecting shells from each beach visit.
  • Do Not Collect Tax: With a valid certificate, skip collecting GET on eligible purchases.
  • Report the Exemption: Include these tax-exempt sales when filing your GET returns, like footprints in the sand telling your business's story.

Lost a Hawaii Sales Tax Exemption Certificate?

Misplaced a certificate? Here's how to handle it:
  • Stay Calm: It's like getting a bit of sand in your picnic—fixable.
  • Contact Your Customer: Reach out for a new copy, just like asking a friend to bring over extra sunscreen.
  • Keep Records: Document your efforts in retrieving a new certificate, like leaving a trail of seashells.
  • Consult a Tax Professional: For smooth sailing, getting expert advice is always wise.
Did you know logo

Renting a surfboard in Hawaii comes with a tax. It’s the price you pay for riding those incredible waves.

Steps for Filing a Hawaii Sales Tax Return

Knowing when to file and pay your sales taxes in Hawaii is key. Here's how it breaks down:
  • Monthly Filing: If your annual GET liability is $4,000 or more, you're on a monthly filing schedule.
  • Quarterly Filing: If your annual GET liability is between $2,000 and $4,000, you're in the quarterly filing club.
  • Semi-Annually Filing: If your annual GET liability is less than $2,000, you only need to file semi-annually.

What If a Filing Date Falls on a Weekend or Holiday?

If your filing date lands on a weekend or holiday, the Hawaii Department of Taxation gives you extra time. You'll have until the next business day to file and pay.

How to File a Hawaii Sales Tax Return

Filing your GET return is a breeze when you follow these steps:
  • Gather Your Info: Before you start, ensure you have all your sales details ready.
  • Access the Hawaii Tax Online System: It's your virtual guide for tax filing.
  • Complete Form G-45: Fill out your form with care, just like writing a postcard home.
  • Submit Your Return: Double-check everything, then submit your return, feeling accomplished.
  • Make Your Payment: Finally, if you owe tax, make your payment to complete the process.

Penalties for Late Filing and Payment

  • Late Filing Penalty: A 5% penalty per month on the unpaid tax, maxing out at 25%.
  • Late Payment Penalty: A 1% penalty per month on the unpaid tax, also up to a maximum of 25%.
  • Interest: Charged at 2/3 of 1% per month on unpaid sales tax.

Hawaii Sales Tax Discounts

Good news! Hawaii rewards timely filers and payers with discounts:
  • 2% Discount: For on-time filers and payers. For instance, if you owe $1,000, you pay $980.
  • 1% Electronic Filing Discount For those filing online and on time. So, if you owe $1,000, you pay $990.
To snag these discounts, just file and pay on time, with no penalties or interest due.

Hawaii Sales Tax Holidays

As of now, Hawaii doesn't celebrate sales tax holidays.

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Top 5 Tips for Filing Sales Tax in Hawaii

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