Hawaii Sales Tax Guide
Chapter 1: An introduction to Hawaii sales tax management
Sales tax is a tax paid to a governing body (state or local) for the sale of certain goods and services. First enacted in the United States in 1921, sales tax dates back to ancient Egyptian times where paintings depict the collection of tax on commodities. Hawaii first adopted a general state sales tax in 1935. Since that time, the rate has risen to 4. In the second quarter of 2015, the Hawaii Department of Taxation reported $773,665 in revenue from taxes on general sales and gross receipts; 44.5% of total Hawaii state taxes.
As a business owner selling taxable goods or services, you act as an agent of the state of Hawaii by collecting tax dollars from purchasers and passing it along to the state and local tax authority. This is an important point worth emphasizing. Any sales tax collected from residents belongs to the Hawaii Department of Taxation. As a business owner, it is your responsibility to manage the taxes you collect to remain in compliance with state laws and avoid penalty and interest payments.When does Hawaii general excise tax need to be collected?
In Hawaii, general excise tax is collected on the sale of tangible goods and some services. The tax is collected by the seller and remitted to state and local tax authorities. The seller acts as a pseudo-tax collector.Do I need to collect general excise tax in Hawaii?
To better understand whether you need to collect general excise tax in Hawaii, we've created a simple three step checklist you can use to get a better feel for your Hawaii tax situation:
- Do I have nexus in Hawaii?
- Am I selling taxable goods or services to Hawaii residents?
- Is my buyer required to pay general excise tax?
If the answer to all three of the questions above is "Yes", then you are required by the Hawaii Department of Taxation to collect, file, and remit general excise tax.Does general excise tax accept out-of-state resale certificates?
At the time of publication, the Hawaii Department of Taxation was not accepting out-of-state resale certificates. If you are an out-of-state business and choose to purchase goods for a vendor located in Hawaii, you can expect to pay general excise tax.What happens if I don't collect any general excise tax?
If you meet the criteria for collecting sales tax (nexus in Hawaii and selling taxable goods or services to taxable residents) and choose not to collect general excise tax, you will be held responsible for the tax due. As such it is extremely important that you set up tax collection at the point of sale. Attempting to contact customers to collect sales tax after the fact is time consuming and unlikely to be fruitful.Is Hawaii a Streamlined Sales Tax (SST) state?
At this time, Hawaii is not a member of the Streamlined Sales Tax (SST) Agreement.What state sourcing rules apply to Hawaii?
Hawaii is a destination-based state. Destination-based states are those where the transaction location is defined as the customer delivery location rather than the shipping location of the business. As a seller in Hawaii, this means you are responsible for applying the sales tax rate determined by the ship-to address on all taxable sales.