Hawaii General Excise Tax: Everything You Need to Know
The Hawaii General Excise Tax, also known as the GET, is a tax on a business's gross income, so a portion of all business transactions go to the state.3 min read
2. Hawaii General Excise Tax Definition
3. Who Pays the General Excise Tax?
4. Should a Business Make Its Customers Pay the Excise Tax?
5. How to Get Your General Excise License
Hawaii General Excise Tax
The Hawaii General Excise Tax, also known as the GET, is a tax on a business's gross income, so a portion of all business transactions go to the state. This includes income that results from product sales as well as services.
Hawaii General Excise Tax Definition
While each state has its own methods for obtaining money — such as lottery sales, sales tax, or gambling — the General Excise Tax is Hawaii's largest source of income. The GET is an added tax on gross income. This is on top of federal and state income taxes. It takes the place of a state sales tax in Hawaii. The GET is similar to a state sales tax, but it's not the same.
Who Pays the General Excise Tax?
Most businesses in Hawaii pay the General Excise Tax. It applies whether a business sells products or provides services. Other people expected to pay the GET include:
- Independent contractors
- Small business owners
- Self-employed individuals
- Those performing “side gigs”
Anyone under these definitions is considered to be running a business.
If a company is located in another state but has a physical presence in Hawaii, it also pays the General Excise Tax. Certain business types are exempt from the GET and others may pay a different rate.
Hawaii requires most businesses to have a sales tax permit. If you're thinking about starting a new business or just beginning to make sales in the state, you'll have to find out what your business permit requirements are. Most people can get their GET license and be set up to do business within three to five days after submitting their application.
Should a Business Make Its Customers Pay the Excise Tax?
Customers in Hawaii are used to paying this tax. It's a surcharge. It's added to the bill, but it doesn't increase the sticker price, so customers only see the tax when they pay. Business owners should realize that their competitors probably pass the tax onto their customers. Any business owner who thinks of absorbing the excise tax himself can put himself at a disadvantage compared to the competition.
Business owners may tack the GET onto their customers' bill or invoice. This is called “visibly passing the tax onto the customer.” Instead of a business owner paying the tax out of the money she collects from a sale, the customer pays it. Business owners can also have it show up as a surcharge, so it will be on a separate line of the invoice, bill, or receipt.
As a business owner, you can pass the tax along to your customers, but you're still responsible for filing the GET tax returns and paying the proper amount to the Department of Taxation. While it's not a requirement to visibly pass on the tax to the customer as an additional itemized charge, this is how it's usually done. Consumer protection laws prohibit business owners from visibly passing on an amount that's higher than the actual GET that's due.
How to Get Your General Excise License
The GET registration process is easy since you can take care of everything online. If you prefer, you can still mail your forms or register in person, but many people find it easier and more convenient to do it online. Fees include:
- Application $20
- Online charge $2.50
If you register online, you can pay with a credit card.
Register your business with the State of Hawaii. You'll submit an application for a State Tax ID, also known as your GET license number. Think about business type you want yours to be. LLCs and Sole Proprietorships are common, but check with a CPA to find out all the pros and cons of the various types. Pay the one-time registration fees. The state will mail the tax license to you.
If you run a business in Hawaii, you'll have to obtain a GET license to adhere to state guidelines. Because the state makes the registration process easy and inexpensive, anyone who runs a business can conveniently take care of this. You can also check with the state to see if your business is exempt from paying the tax.
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