Hawaii General Excise Tax Overview, Audits, Penalties & More

Hawaii is certainly one of the most unique states in the nation and one of the most isolated groups of islands in the world. Its geographical position isn’t the only thing that sets Hawaii apart, though. The state also utilizes a different type of state tax system than most other states on the mainland.

Instead of implementing a sales tax, Hawaii uses a general excise tax (GET). The GET tax in Hawaii is assessed on businesses. A sales tax, on the other hand, is a tax assessed on the customer that’s collected by the business and then remitted to the state.

Are your business activities subject to the GET tax? Have you fallen behind on filing or paying your Hawaii state taxes? Find out everything you need to know about Hawaii’s general excise tax, audits, penalties, and more below.

Hawaii’s General Excise Tax: An Overview

The state imposes the general excise tax in Hawaii to help generate revenue for government activities. Unlike the sales tax system in other states, businesses in Hawaii are charged the general excise tax for the privilege of conducting business. 

The GET tax rate is as follows:

• 0.15% - Insurance and Commission Businesses
• 0.5% - Manufacturing, Wholesaling, and Producing Businesses
• 4% - All other businesses

Businesses that pay the 4% GET rate may also face a 0.5% county government surcharge. The county surcharge is effective in Honolulu, Kauai, and Maui, making the GET 4.5% in these areas.

The Significance of the Excise Tax in Hawaii’s Tax Structure

The excise tax is significant in Hawaii’s tax structure because it is the most significant source of revenue from taxes. This tax structure helps support funding for state-sponsored activities.

What Is Hawaii's General Excise Tax?

The general excise tax is a tax levied on any organization conducting business in the state of Hawaii. The tax is charged on the gross receipts of the person or organization engaging in the business activity. 

The business’s gross receipts consist of the business’s total sales revenue before deducting any business expenses. It also includes any excise tax that you pass on to your customers. Since you can pass the GET to your customers, you may need to include that in your gross income calculations.

GET vs Sales Tax

The main difference between these two tax structures is that the customer pays a sales tax when they purchase items. Businesses simply collect these taxes from customers and send them to the government. GET taxes are instead levied on the businesses themselves, but in Hawaii, business owners can opt to pass these taxes onto their customers in certain situations. 

Additionally, GET taxes apply to income from almost all types of business activities, whereas sales taxes usually only apply to tangible goods and certain services, depending on the laws in the state.

Does Hawaii have sales tax?

If you’re new to Hawaii’s tax structure, you might still be wondering -- does Hawaii have a sales tax? The answer is no. There are no Hawaii sales taxes in place. The GET system replaces the sales tax system.

Who Needs to File the GET in Hawaii?

If your business has nexus in Hawaii, you’ll need to take out a GET license. Under the law, any business with a nexus in Hawaii is considered to be conducting business in the state. A nexus can be established through a physical presence, like an office, having stock or inventory in Hawaii, or providing services in the state. 

If you're based out of state, you're considered to have nexus in Hawaii if your business has $100,000 or more in gross income in the state or 200 or more transactions.

Hawaii's Basic Registration Process for New Businesses

If you plan on starting your own business in Hawaii, then you’ll need to register your new organization with:

• Hawaii Department of Commerce & Consumer Affairs (not required for sole proprietorship)
• Internal Revenue Services (not required for sole proprietorship)
• Hawaii Department of Taxation
• Hawaii Department of Labor & Industrial Relations
• The county where you plan to do business

To register for the GET, you need to complete Form BB-1, the State of Hawaii Basic Business Application. On this form, select “General Excise/Use Tax”. By doing so, you’ll register for a GET license. You can submit your application for the GET tax in Hawaii online at hitax.hawaii.gov, via mail, or in person at a district tax office. Typically, filing for the Hawaii GET tax online is the easiest, fastest, and most efficient way to get your license. 

After applying, you can expect your application to be processed within a few weeks. If you apply online using the Hawaii Business Express system, you can expect it to be processed within 5 business days. The registration fee for this process is $20.

Once you get your GET license, you must display it at your place of business. If you conduct business at multiple locations, you need to ensure you have an additional branch GET license for each business location.

Depending on the nature of your business, you may also need to seek a professional or vocational license to operate legally. You can visit Hawaii’s Department of Taxation page if you need more information on setting up your new business and remaining compliant with tax laws. Or use TaxCure to find a tax pro based in Hawaii who can answer your questions and help you with all HI business taxes.

An Overview of GET Filing Requirements

When you’re conducting business in Hawaii, you’re required to file for a GET license. The requirements for filing for a license include going through an application process, paying a fee, and then posting your license at your place of business. You can apply for your Hawaii GET license and pay the fee online at https://tax.hawaii.gov/geninfo/get/

How to Pass the GET to Your Customers

In most cases, you can pass the GET onto your customers, but you must do so visibly. In other words, the receipt must show how much the customer was charged for GET. You cannot pass GET to customers for insurance premiums or when prices are fixed under the law. 

When you pass GET to your customers, you must include the amount collected in your gross receipts when filing your GET return. For instance, say that your business has a 4% GET rate, you sell a customer something for $100, and the customer pays $4 in GET. When you file your return, you will note $104 in sales and then, the GET will be applied based on that amount. 

However, when you apply the 4% GET rate to $104, you get $4.16. But unfortunately, you only collected $4. To make up for this discrepancy, Hawaii allows businesses to charge up to 4.166% if they have a 4% GET rate and up to 4.712% if they have a 4.5% rate. 

GET Audits in Hawaii

Hawaii’s state tax agency regularly audits various businesses throughout the state. While these audits are generally random, a few things can cause the tax agency to suspect that your business isn’t correctly reporting or paying its fair share. 

Many audits occur in Hawaii as a result of low GET payments. Remember, the GET is charged on gross receipts, not the business’s overall profits. A business could be struggling and barely breaking even, but it might still have a substantial GET liability. If a business isn’t paying anything towards GET, that will also likely trigger an audit. In Hawaii, even non-profit businesses must file for and pay their GETs.

Due Dates for GET Returns

GET returns are due annually or periodically depending on your assigned filing cycle. If you're an annual filer, your GET return is due the 20th day of the fourth month following the end of your fiscal year. if you use a calendar year, the due date is April 20th. 

For periodic filers, the due date is the 20th day of the month following the tax period. For example, monthly filers must file their January reports by February 20th. Quarterly filers should file on the 20th of the month following the end of the quarter. For instance, second quarter (April, May, June) reports are due on July 20th. Semi-annual filers should file by July 20th for the first half of the year and January 20th for the second half of the year.

Penalties for Delinquent GET

Owing Hawaii back taxes is not great because the state tax agency can initiate collection efforts to ensure you pay what you owe. The first thing that will happen if you’re delinquent on your excise taxes is that your account will get charged penalties and interest.

When you fail to file a return, you’ll get charged 5% of your overall tax burden every month until you pay your tax burden. This penalty will continue to increase until it reaches a cap of 25%. On top of that, the longer you don’t pay your tax burden, the more interest will compound on what you owe. Interest is 2/3 of 1% every month on the overall unpaid tax balance.

These financial penalties are significant, but they aren’t the only type of collection effort available to the state’s tax agency. If you do not respond to the agency’s requests for payment and you’ve already faced financial penalties, the Department of Taxation may use enforcement actions like wage garnishment, tax liens, or even asset seizure.

What is the G-49 Form for Hawaii Excise Tax?

Form G-49 is your annual GET return. This return must be filed, even if you also file your GET returns periodically. You must also file this form even if no taxes are due in the filing period. If that’s the case, you must write or electronically type in a zero to display the total amount due for every line describing your main business activity.

What is the G-45 Form for Hawaii Excise Tax?

Form G-45 is the periodic GET/Use tax return that’s used to report and pay your general excise, use, and county surcharge taxes. You will use this form to report your gross income, any exemptions, and the amount of taxes due. You may need to file this form multiple times a year depending on the amount of GET your business pays overall throughout the year.

You’ll file G-45 forms twice a year if your business pays less than $2,000 in GET a year. You’ll file the G-45 form quarterly, or every three months, when your business expects to pay $4,000 or less in GET a year. If your business brings in more than $4,000 in GET every year, then you’ll be required to file the G-45 return every month.

If your business won’t be paying more than $100 in GET revenue, then you’ll only have to file form G-45 once a year.

Do You Disagree with Your Excise Tax Assessment?

If the Hawaii Department of Taxation audited your GET returns and provided an assessment that you disagree with, then you have the right to file an appeal.

When you file an appeal with the Administrative Appeals Office, you want to make sure that you have a solid basis for the appeal. If you’re considering taking this type of legal action, find a Hawaii tax expert who can analyze your entire financial picture, educate you regarding Hawaii’s tax laws and regulations, and help you build the strongest possible appeal case.

Are You Looking for a Tax Professional to Help You With Your Hawaii Tax Problems?

Do you have more questions about the GET system in Hawaii? Do you need help sorting out a delinquent tax situation, filing a GET return, or registering your new business to pay the GET?

Then, use TaxCure to find a local tax pro ready to help you resolve your taxes and get you back in good standing with Hawaii’s Department of Taxation. Get connected now by using our search engine. Then, narrow down your search results to find a Hawaii-based tax pro who has experience with business taxes and the GET.