Ocean View HI Sales Tax:
What Businesses Must Know

Sales tax range in Hawaii

As of 2024, Hawaii maintains a unique General Excise Tax (GET), distinguishing it from a traditional sales tax in Honolulu, HI or other counties. The state rate for the GET remains at 4.0%. However, this year has seen some modifications at the county surcharge levels.

• Oahu: In 2023, Oahu had a 0.5% county surcharge, resulting in a total GET of 4.5%. In 2024, this surcharge increased to 0.75%, making the total effective GET 4.75%.
• Maui: For 2023, Maui did not implement any county surcharge, so the total GET was 4.0%. In 2024, Maui introduced a new surcharge of 0.5%, raising the total GET to 4.5%.
• Hawaii (Big Island): In 2023, Hawaii County had a 0.25% surcharge, putting the total GET at 4.25%. For 2024, this surcharge remains unchanged, keeping the total GET at 4.25%.
• Kauai: During 2023, Kauai imposed a 0.5% surcharge, leading to a total GET of 4.5%. This rate continues into 2024 without any changes, maintaining the total GET at 4.5%.

These changes reflect an overall trend towards slight increases in the county surcharges, including the sales tax in Honolulu, HI, affecting the overall rates consumers and businesses experience. Importantly, the base state rate continues to stay steady at 4.0%.

An essential aspect of understanding the 'hi sales tax' or the colloquial 'sales tax Hawaii' includes recognizing the unique elements present in Hawaii's taxation system. The predominant General Excise Tax (GET) differs considerably from conventional sales taxes, imposing a 4% state rate along with additional county surcharges.

For instance, Oahu has implemented a 0.75% county surcharge starting in 2024. These nuances highlight the need for both consumers and businesses to stay informed about the specific rates and surcharges applicable in their respective localities.

Calculating Hawaii sales tax

Determine if the sale is taxable

• Most tangible goods are subject to sales tax.
• Certain services may also be taxable.
• Some items may be exempt; check state regulations.

Identify the applicable tax rate

• State General Excise Tax (GET) Rate: 4.0% statewide.
• County Surcharges:
  • Oahu: Additional 0.5% for a total of 4.5%.
  • No surcharges in other counties as of 2024.

Calculate tax for physical goods

• Multiply the sale price by the state GET rate.
• If applicable, add the county surcharge.

E-commerce transactions

• Hawaii law requires businesses to pay GET on e-commerce sales at the origin rate (4.0%).
• Remote sellers (out-of-state) must also collect GET if they meet economic nexus thresholds.

Software as a Service (SaaS)

• Taxable under Hawaii GET.
• Apply the state rate (4.0%) and any applicable county surcharge.

Service Sales

• Taxable services: Legal, accounting, or other professional services.
• Non-taxable services: Certain healthcare services.

Economic nexus for out-of-state sellers

• Threshold: Gross revenue of $100,000 or 200 transactions annually in Hawaii.

Rounding rules

• Round the tax to the nearest cent for precise calculations.

Collecting and remitting tax

• Businesses must separately list GET on receipts.
• File and remit GET payments to the Hawaii Department of Taxation regularly.

Online calculators and tools

• Consider using tax software for accurate calculations and compliance.

Recent changes to Hawaii sales tax

When it comes to taxes in Hawaii, knowing the tax percentage is crucial for proper financial management. The tax percentage in Hawaii primarily refers to the state's general excise tax, which functions similarly to a sales tax. The base rate for the general excise tax in Hawaii is 4%, though it can increase depending on the specific county. For instance, in Honolulu, the tax rate can be as high as 4.5%. This rate applies to most goods and services, making it essential for both businesses and residents to understand and accurately apply the tax percentage to ensure compliance and effective budgeting.

In 2024, Hawaii introduced several changes to its sales tax system to boost state revenue and support public services. Here are the key updates and their differences from 2023:

• Starting January 1, 2024, the General Excise Tax (GET) rate for most goods and services increased from 4.0% to 4.5%.
• The Transient Accommodations Tax (TAT), which applies to hotel, vacation rental, and other short-term lodging rates, rose from 10.25% in 2023 to 11.0% beginning January 1, 2024.
• The surcharge for Oahu, meant to fund the Honolulu Rail Transit project, remained at 0.5%, keeping the overall GET rate at 5.0% on Oahu.
• Neighbour islands such as Maui, Kauai, and Hawaii County implemented additional surtaxes to support local infrastructure projects. For example, Maui introduced a 0.25% surcharge effective March 1, 2024, bringing its overall GET rate to 4.75%.
• A new tax was introduced on digital goods and services, including streaming services and online courses, at a rate of 4.5%, lining up with the updated general GET. This was previously untaxed in 2023.
• Food and prescription drugs, exempt from GET in 2023, remain exempt in 2024, continuing to offer relief to consumers and maintaining the state’s effort to reduce the cost of living.
• With changes occurring in 2024, businesses in Honolulu, HI, must be particularly mindful of the updated regulations. The increased county surcharge in Oahu now sets the total GET here at 4.75%, which could be perceived as a hike in the 'hi sales tax.' This adjustment aims to fund significant public works and infrastructure projects within the county. Compliance with these updated rates is critical to avoid penalties and ensure smooth business operations within the state.

These updates reflect a moderate increase in tax rates aimed at generating additional state revenue, with targeted changes addressing new economic segments and regional needs.

Understanding origin vs. destination sales tax collection

Hawaii operates on a unique tax structure known as the General Excise Tax (GET) rather than a traditional sales tax system. This tax is technically a tax on the business for the privilege of doing business in the state, although it is often passed on to consumers.

The GET applies to most transactions at all levels of business, including wholesale and retail, making it a "modified origin" system where the tax is generally paid by the business rather than directly by the consumer.

Taxable products in Hawaii

In the state of Hawaii, the General Excise Tax (GET) is applied broadly rather than a traditional sales tax. This applies not only to tangible goods but also to services and other transactions.

The GET rate in Hawaii is generally around 4%, but it can be slightly higher depending on the county. Maui, Kauai, and Hawaii counties have their own additional rates. Here’s an overview of product genres that typically incur the GET:

Tangible Personal Property

• General Merchandise: Clothing, electronics, furniture, books, and other retail items.
• Groceries: Both perishable and non-perishable food items.
• Automobiles: New and used vehicles, motorcycles, and other motorized forms of transportation.
• Appliances: Major and minor household appliances, electronics.
• Alcohol and Tobacco Products: Beers, wines, spirits, cigarettes, and other tobacco products.

Services

• Professional Services: Legal, medical, accounting, and consulting services.
• Personal Services: Beauty and grooming, housekeeping, repairs, and other personal services.
• Entertainment: Admission to events, movies, concerts, and similar activities.
• Construction and Contracting: Both residential and commercial projects.

Digital Goods and Services

• Software and Digital Products: Downloadable applications, eBooks, online subscriptions.
• Streaming Services: Subscription fees for movies, music, and other streaming services.

Rentals and Leases

• Real Property Rentals: Residential and commercial property leases.
• Vehicle Rentals: Cars, trucks, and other vehicle rentals.

Miscellaneous

• Utilities: Electricity, water, sewage, gas.
• Telecommunications: Cable, internet, phone services.

Is SaaS taxable in Hawaii?

In Hawaii, SaaS (Software as a Service) is generally considered taxable under the state's General Excise Tax (GET). This tax applies to the gross income from business activities, including the sale of software services. Therefore, companies offering SaaS to customers in Hawaii must ensure they comply with GET regulations.

Are digital products taxable in Hawaii?

In Hawaii, digital products are subject to taxation under the state's General Excise Tax (GET). This includes items like software, e-books, and streaming services. Businesses selling digital goods must collect and remit this tax, which applies to both local and out-of-state sellers catering to Hawaiian customers.

Are services taxable in Hawaii?

In Hawaii, most services are subject to the state's General Excise Tax (GET). Unlike sales tax, the GET is applied to the business's gross income, covering a wide array of services including professional, construction, and personal services. The rate may vary depending on the type of service and transaction.

Physical nexus

In 2024, Hawaii's physical nexus rules for sales tax showed notable updates compared to 2023. Comparatively, the 2024 rules maintain the structures already present in 2023, focusing heavily on physical presence and activities within the state as the basis for sales tax obligations.

Presence

• 2024: Physical presence continues to be a key determinant for nexus, including owning or leasing property, inventory, or having employees in Hawaii.
• 2023: Similarly, having physical property or employees in the state in 2023 constituted a physical nexus for sales tax purposes.

Temporary Presence

• 2024: Temporary physical presence still establishes nexus; if a business's employees or representatives frequently travel to Hawaii for sales activities, it’s considered a nexus.
• 2023: The rules were identical to 2024, where temporary physical presence through employees or sales representatives imposed sales tax obligations.

Affiliates

• 2024: A business using affiliates in Hawaii to help establish or maintain a market indirectly generates a physical nexus.
• 2023: This criterion was also applied in 2023, where affiliates contributed to creating a nexus if they played a role in market maintenance.

Trade Shows

• 2024: Participation in trade shows in Hawaii for more than just solicitation purposes influences nexus creation.
• 2023: The rules encompassing trade show participation affecting nexus were similar in 2023.

Economic nexus

In 2024, Hawaii's economic nexus laws for sales tax saw notable adjustments from 2023, impacting remote sellers and marketplace facilitators. This brief encapsulates these changes and compares them year-over-year.

Overall, while 2024 maintains several core aspects from 2023, significant efforts towards simplifying transaction counting requirements, enforcing compliance, and encouraging digital processes represent strides towards a more manageable tax environment for remote sellers and marketplace facilitators in Hawaii.

Threshold for Remote Sellers

In 2023, remote sellers were required to register for General Excise Tax (GET) collection if they had $100,000 in gross revenue or 200 separate transactions in the state in the current or preceding calendar year. In 2024, this threshold remains unchanged at $100,000 but the transaction requirement has been eliminated, simplifying compliance measurement.

Marketplace Facilitators

During 2023, marketplace facilitators needed to comply with the same nexus standards as remote sellers—$100,000 in sales or 200 separate transactions. In 2024, while the revenue threshold persists, the transaction count requirement has again been dropped, easing the tracking burden for facilitators.

Compliance and Reporting

The year 2023 mandated all entities meeting nexus requirements to report and remit GET quarterly. By 2024, the same quarterly reporting remains, but there is an added emphasis on digital filing, pushing entities towards electronic submissions instead of paper filings, aiming to streamline processes.

Economic Nexus Enforcement

In 2023, the enforcement of economic nexus was strict but mainly reactive. Hawaii’s 2024 laws bolster this with proactive audits and reviews, increasing the likelihood of compliance checks and potential penalties for non-compliance.

Registration Simplification

The previous year, 2023, saw a rather cumbersome registration process for new remote sellers. Come 2024, Hawaii introduced an online system designed to expedite this process, reducing the administrative overhead for new market entrants.

Sales tax exemption certificates

In Hawaii, sales tax exemption certificates permit eligible businesses and organizations to make tax-free purchases of goods and services that are typically subject to the state's General Excise Tax (GET). To qualify, purchasers must fall into specific categories such as nonprofit organizations, government agencies, or businesses purchasing items for resale.

These certificates must be completed accurately and presented to the vendor at the time of purchase. The vendor retains the certificate to substantiate the tax-exempt transaction during audits. Misuse or incorrect application of these certificates can result in penalties, including payment of the owed tax plus interest and fines.

Sales tax discounts and incentives

In 2024, Hawaii offers several sales tax incentives and discounts designed to stimulate business growth and investments.

Firstly, there is the General Excise Tax (GET) exemption for certain exported goods and services, meaning businesses can benefit from a reduced tax burden on out-of-state transactions.

Additionally, there's a GET exemption for enterprise zones, which allows qualifying businesses within these zones to enjoy lower tax rates. The state also provides tax credits for renewable energy projects and investments in tech industries to encourage sustainable development and innovation.

State tax holidays in Hawaii for 2024

Sales tax holidays are specific periods when sales tax is not charged on certain items, typically to encourage consumer spending.

Hawaii does not have any sales tax holidays scheduled for 2024.