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Hawaii Sales Tax on Wholesale

  • Sales Tax
  • February 22, 2016 | Laura McCamy

When you talk about Hawaii sales tax, you immediately run into contradictions. First of all, in the words of a Department of Taxation bulletin, “Hawaii does not have a sales tax.”

Then there’s the tax on wholesale sales. Isn’t the whole point of wholesale purchases that there is no sales tax, since that will be collected from the end consumer? Not in Hawaii.

In lieu of a sales tax, Hawaii levees a general excise tax, or GET. Businesses can add GET as an extra charge to their customers, like a sales tax, but they don’t have to. Businesses with nexus in Hawaii do, however, have to pay up. GET is a tax on business revenue.

Which brings us to wholesale. The Hawaii sales tax (ahem, GET) rate on retail sales ranges between 4 percent and 4.5 percent. The GET on manufacturing businesses and those that provide wholesale goods and services is 0.5 percent, essentially a sales tax on wholesale sales.

If you run a candy shop, for example, the wholesale price you pay for a box of chocolate-covered macadamia nuts includes a 0.5 percent GET. Then you sell that same box of chocolates and you charge your customer another 4.5 percent GET.

It appears that the chocolate-covered macadamias have been taxed twice, doesn’t it? Not according to the State of Hawaii. Rather than seeing one product taxed twice, Hawaii sees two transactions, one wholesale, one retail.

The Aloha State is very different from the other 49 in many respects. So perhaps it’s no surprise that Hawaii sales tax (oops -- GET) is different too.

If you don’t understand the system, lie on the beach at Waikiki for a couple of hours and ponder it. In the end, you probably won’t care. What’s a little extra sales tax when you’re in one of the most beautiful places on earth?

Avalara Author
Laura McCamy
Avalara Author Laura McCamy