Should you collect GET in Hawaii?
Hawaii doesn’t have GET. Instead, the businesses are subject to GET (General Excise Tax) on their gross receipts from business in the state. However, you will collect the GET if you determine the nexus in Hawaii. A nexus is a presence that may come physically or economically. Activities subject to GET include wholesaling, retailing, farming, services, construction contracting, rental of personal or real property, business interest income, and royalties.
A physical nexus is typically created when your business has a Hawaii store, warehouse, or office location. An economic nexus is intertwined when you cross paths with threshold limits as already stipulated by the state. These thresholds can be on a revenue or some other transactional basis.
Let’s explore if your business has a Physical nexus in Hawaii.
A physical nexus is integrated when your business is engaged in the following in Hawaii:
- Leasing or owning any physical property in Hawaii.
- Maintaining, occupying, or using a place of business or an office in Hawaii.
- Employing or retaining any contractor, including an agent, representative, or salesman, by whatever name is called.
- Having a distribution place in Hawaii.
You may also refer to the Hawaii Taxation Department advisory to know more about business activities that may create a physical nexus within the state.
Is it constituting an Economic nexus in Hawaii?
You must comply and register under GET rules if your retail business sales in Hawaii exceed $100,000 or you made more than 200 sales during the previous four quarters.
For more detailed guidance on economic or physical nexus, please read the guidance (pg. 2) issued by the Taxation of Revenue of Hawaii.
How can you Register for GET in Hawaii?
You must use Hawaii Tax Online to apply for a tax registration and obtain a tax account number in Hawaii. All you need to do is complete the BB-1 form online and submit it for processing. When you have more than one business activity, you can list all your business activities on one registration application, thus not needing to apply for separate activities.
Additionally, before applying for a new tax account number, make sure you have the following information handy:
- Personal and Business IDs (SSN, EIN, etc.).
- Business starts date.
- Bank Account Information
- Contact information.
- Business-related information (e.g., name, business title, etc.)
- Accounting period and method
The state charges a one-time registration fee of $20. To learn more or clarify your doubts, contact us or check out the registration requirements stipulated by the state. Once you apply, you will receive the registration details.
Is your product or services liable to GET in Hawaii?
Tangible Property: Unlike other states, GET in Hawaii is imposed on the privilege to conduct business in the state and is computed on your business’s gross income. Further, it doesn’t matter whether you charge it from your customers or not; you must pay the GET in Hawaii if you have the taxable gross receipts; however, you are allowed to pass on the tax burden to your customers. Accordingly, it is treated like a sales tax, and most of the tangible goods come under the purview of the General Excise Tax. Refer here for more details.
Digital Product: Hawaii charges GET on digital products. So, if you sell digital products such as software, streaming services, e-books, etc., you must collect the GET. Please see the Hawaii Taxation Department advisory on digital transactions.
SAAS: SAAS is software that allows users to connect to the cloud and use it over an internet connection. It is taxable in Hawaii. Click here for the guidance issued by the state.
Services : Services are generally subject to GET in Hawaii unless otherwise exempted. Some of the taxable services in Hawaii include manufacturing, renting, earning commissions, etc. To learn about the taxable services, visit here.
The state provides certain exemptions from the GET levy, such as material used in agricultural production, farm equipment & machinery, sale to federal government agencies, prescription drugs, etc. To see what exemptions are covered, please click here.
How should you collect and calculate state taxes in Hawaii?
Collecting and computing accurate GET to be remitted to the state may involve stratospheric efforts, especially when you are not Hawaii-based. The GET is destination-based in Hawaii, which means you must collect taxes on tangible property sold to buyers based in Hawaii.
However, complexities are involved when you have a business nexus, even outside the state. Any default may lead to severe concerns, penalties, or fines by the state. That is what TaxDo is here for you! Our specialized GET calculator and professional services will simplify your job and lighten your compliance burden.
Hawaii’s base GET rate is 4%, followed by the surcharge levied by some counties, which can go up to 0.5%. The GET rates page on the Hawaii Taxation Department website provides more information.
Below is the simple formula you can use to calculate your GET collection on each piece of merchandise sold:
GET collectible = Sale value * (4% plus county surcharge)
Do you need to collect GET on Shipping Charges?
If non-taxable items are sold, shipping charges associated with such a sale are not subject to GET. However, when a sale includes taxable and non-taxable items, shipping charges need to be apportioned relatively between the taxable and non-taxable parts of the sale. Accordingly, GET applies to the taxable portion of the sale. Refer to the tax calculation example given by the state in this link, which includes delivery charges in the sales price.
How should you file GET in Hawaii?
GET return will be filed electronically through the Hawaii Department’s online portal (Hawaii Tax Online). You must pay the GET along with filing the return to avoid penalties and interest.
Filing frequencies and due dates
Based on your reported GET or estimated taxable sales, the Hawaii Department of Taxation assigns you a Monthly, Quarterly, or semi-annual filing frequency.
According to your filing frequency, you must file the return within 20 days from the end of the relevant reporting period.
Note: If the due date is a holiday or weekend, the next business day would be considered the final due date. This link will take you to the official Hawaii website, where you can see what the state says about GET filing due dates.
Are there any fines or penalties for default when filing or paying GET?
The state levies a penalty of 5% per month of the GET due. The total penalty can’t exceed 25% of the tax due. Additionally, interest is calculated on any unpaid tax at 2/3 of 1% per month or part of the month.
Please visit the GET department website to know more.