Everything You Need to Know About The Hawaii General Excise Tax

QUICK LINKS 

Looking for information about the General Excise Tax? Use these links to find what you need.

  • Hawaii Tax Forms. Printable tax forms: G-45 (periodic) or G-49 (annual reconciliation).
  • Pay Hawaii taxes online. Pay your state taxes or general excise taxes online. There is a $1 electronic check fee or a variable fee for paying with a credit card.
  • Register with eHawaii. Register your business in Hawaii online.

general-excise-tax
What is that additional charge on our receipts? It’s none other than our good friend, the General Excise Tax (GET).

Updated 2/28/2019: Sorry for the issues with this page info going missing and comments not being available  — I was recently hacked and had to deal with it along with a backdoor that would reset the issue until solved.

Updated 1/28/2019: To increase site speed, I’ve had to limit the comments loaded per page to 15 comments (replies don’t count) — click “OLDER COMMENTS” to view older comments.

Updated 5/30/2018: I am slowly making updates to the article. If you post 2 or more links, your comment will be auto-marked as spam by the system. Thanks to DAVID W RISTAU CPA for helping to answer some of the questions in the comments section. There are now over 300 questions and answers — you might find your answer in the comments.

Updated 10/18/2014: I am not a CPA or affiliated with the Hawaii State Department of Tax. If you have questions about taxes, call them at 808-587-4242 or contact them. You can also contact VITA with questions, a nonprofit that helps people with tax information. Please do not contact me for detailed tax advice — everything I know about the GET is right here in this article .

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Have you ever wondered where states get their money from? Each state has their own methods (sales taxes, lottery, gambling), but for Hawaii, the biggest source of income is the General Excise Tax (GET). The tax is on gross income by businesses, meaning that part of every single business transaction goes to the state, whether it’s you buying a pack of gum at the 7-Eleven, or you constructing an office for someone.

 

Who has to pay the General Excise Tax?

Most businesses that have business transactions occur in Hawaii have to pay the GET. This applies to business that sell goods or provide services.

If you are an independent contractor, a small business owner, a freelancer, a self-employed person, or do “side gigs,” you will need to pay the excise tax, since you are considered a business. Businesses located in another state with a physical presence in Hawaii also have to pay the GET.

There are some business types who are exempt and there are some business types who have a different rate. More on this later.

 

Is the General Excise Tax a sales tax?

No, it is not. Although both have the same purpose (give money to the state), the two are a bit different. The main difference is who pays the tax. In states that have a sales tax, the tax is on consumers who buy retail goods. In those situations, business help the state by collecting the sales tax for the state. With the GET, the tax is on businesses. Furthermore, it’s not just goods getting taxed — services, wholesale goods, and rents are also taxed.

 

How much is the General Excise Tax?

The base rate for the GET is currently 4% of gross sales (as of 4/11/2013). In the City and County of Honolulu aka Oahu, the rate is 4.5%. The extra .5% for Oahu is to help pay for the mass-transit rail project on Oahu. Also, anyone conducting business on Oahu or has a “physical presence” on Oahu has to pay the extra .5%.

For example, if you’re renting out apartments in Oahu and Maui, you’ll be paying 4% GET on the Maui apartments and 4.5% on the Oahu apartments.

But why do I see 4.712% tax on my receipt on Oahu?

The answer is a bit complicated, so pay attention to this example:

You own a lunch truck. Jerry Maguire comes one day and buys a loco moco plate from you. The loco moco plate has a price of $10.

As a lunch truck business, you have 2 choices regarding the GET:

Choice 1: You pay the GET. If you choose to pay the GET, Jerry Maguire will be billed $10 and you will collect only $10 from him. When the time comes to pay your GET to the state tax department, you will pay 4.5% multiplied by your gross sales (on Oahu), which will mean you pay 45 cents of that $10 you collected.

Choice 2: You make the customer pay the GET (the common method). If you want to have Jerry Maguire pay the GET instead, you will add 4.5% to the total bill. So, the $10 loco moco should become $10.45, after tax. But you’ll still have to pay taxes out of your pocket. Why? Because the state considers the 45 cents tax you collected to be income too, so you will pay a tax on that tax you collect (confusing right?). Paying 4.5% tax on the 4.5% tax actually equals 4.7025%, but the state allows you to round up a bit and you end up with a GET rate of 4.712% of the sale amount of that plate lunch. Most businesses force customers to pay the excise tax and then the excise tax on the excise tax, so you’ll see 4.712% on your bill, not 4.5%. On outer islands (no .5% Oahu surcharge), this means a GET rate of 4.166%. Most businesses do this because it’s common and it means that they won’t have to pay GET out of their pocket, as the customers paid it already.

 

Should I make my customers pay the excise tax?

Probably.

People in Hawaii are accustomed to the tax. Furthermore, it is a surcharge, so it’s added onto the bill, but doesn’t make your sticker price higher, meaning people only see if when it comes time to pay. Furthermore, your competitors probably pass the excise tax onto customers, so if you decide to absorb the excise tax yourself, that means you’re at a financial disadvantage compared to them.

For my business, I don’t pass the GET onto my clients because it makes my accounting easier. Also, I think giving a client an invoice of $800 is much more presentable than a bill of $622.83. Round numbers also make it easier for clients to pay me with cash, which is my preferred method of payment. But really, it’s up to you.

Exception: certain industries are not allowed to charge their customers for GET, such as travel agents (see this article for more info).

 

Is it okay to pass the General Excise Tax onto my customers? How about for quotes?

As a business, you can tack on the GET onto your client or customer’s bill or invoice. This is also known as “visibly passing the tax onto the customer.” This method makes your customer pay it instead of you paying it out of the money you collect from the sale. You can also have the tax show up as a surcharge, meaning it shows up on a separate line on the bill/receipt/invoice.

Quoting: If you give quotes in your line of business like me, you can pass the GET to your customer only if you tell them or write that there is a certain % tax in addition to the quote.

Examples:

If I say, “I want to make you an awesome website! Your quote: $50,000!”
>>
 I cannot tack on GET — my bill must be for $50,000 flat.

If I say, “I want to make you an awesome website! Your quote: $50,000 plus tax!”
>> I still cannot tack on GET because I need to be specific about the rate (4%? 4.1666%? 4.5%? 4.712%?).

If I say “I want to make you an awesome website! Your quote: $50,000! (Plus 4.712% tax)”
>> Now I can tack on GET, because it is clear to the customer that they will have to pay tax in addition to the quoted amount.

 

How often do I pay the General Excise Tax? What’s a filing period?

Anywhere from every month to every 6 months – it depends on how much GET you expect to pay. The higher your expected GET, the more frequently you should pay.

If you pay this much in General Excise Taxes per year… You pay this often
less than or equal to $2000 every 6 months
more than $2000, but less than or equal to $4000 every 3 months
more than $4000 every month

Basically, the more money you make, the more often you pay, cause the state wants that tax money!

View original article

The filing period depends on when your tax year begins. Most of us use a calendar year, meaning our tax year starts on January 1st and ends on December 31st. If you pay quarterly, then that means your 4 filing periods will be January to March, April to June, July to September, and October to December.

Note: You need to also file an annual reconciliation. The G-45 is for periodic payments, as mentioned above. However, you will also need to file a G-49, an annual return and reconciliation. It’s basically a form that checks to make sure the GET you paid is accurate at the end of the year. You need to file this to let the state mark you as filed for the year.

Why do you need a reconciliation? Let’s say you sell hula skirts and had $10,000 gross sales in January. You pay your GET that quarter. But then in October, that same customer returns all the hula skirts. You then refund his money. Those $10,000 of hula skirts are no longer a sale, so you should not have to pay GET on them. However, because you already paid GET on those hula skirts, you’ve overpaid GET. So, you then can use the reconciliation to get a refund. Or you can use the reconciliation to find out that you owe more than you’ve paid for the year.

Basically, it works the same way as regular taxes: you or your employer pay taxes periodically, and then at the end of the tax year, you check to see if you owe or if you’ll get a refund.

 

When are General Excise Taxes due?

For period GET (form G-45), your taxes are due 20 days after your filing period ends (as I said before, your filing period depends on how much you make). So if your tax year starts on January 1st, your quarters end on March 31, June 30, September 30, December 31. And then your GET is due on April 20, July 20, October 20, and January 20 respectively.

Here is an example of someone who pays quarterly GET:

Event Date
Tax year starts January 1, 2013
Quarter 1 ends March 31, 2013
Quarter 1 GET due April 20, 2013
Quarter 2 ends June 30, 2013
Quarter 2 GET due July 20, 2013
Quarter 3 ends September 30, 2013
Quarter 3 GET due October 20, 2013
Quarter 4 ends December 31, 2013
Quarter 4 GET due January 20, 2014

* this is only an example, you might pay monthly or only 2x a year, depending on your gross income.

For annual reconciliation (form G-49), your taxes are due on the 3 months and 20 days after your tax year ends. So if your tax year started on January 1, 2013, it ended December 31, 2013, and so your G-49 will be due on April 20, 2014.

Event Date
2013 Tax year started January 1, 2013
2013 Tax year ended December 31, 2013
2013 G.E.T. G-49 due date April 20, 2014

 

How do I get a General Excise license and how do I pay my GE taxes?

The business and GET registration process is very easy, thanks to the state making the entire process available online. You can also do it in person or mail in your forms, but it’s much easier to do it all online.

Note: there is a $20 application + $2.50 online charge. You can pay during the online process with a credit card.

Here’s how to get your General Excise Tax license:

  1. Register your business with the state of Hawaii (link here) and you will also apply for a State Tax ID (aka your General Excise Tax License Number) along the way. You need to consider what type of business you want to register as. Sole-Proprietor and Limited Liability Corporation are common choices, but you should talk with a CPA if you want to know the pros and cons of the different choices (scroll to the bottom for my CPA recommendation). If you’re a sole proprietor, you can also apply for a trade name (aka a business alias). Make the one-time registration payment and wait for your license to come in the mail. The registration process is for the purpose of getting your tax license. If your business is already registered with the State of Hawaii but you don’t have a General Excise Tax License Number or State Tax ID, then you can simply go here, search for your business name and then apply for a license number.
  2. Register for e-filing with eHawaii.gov. This will create an online account for you to pay your General Excise taxes online with a credit card.
  3. When it comes time to pay your GET, go to eHawaii.gov’s eFile, select form G-45 (General Excise Payments),  fill in the fields, your tax liability should be calculated automatically, and pay with your credit card.
  4. The business registration directory is public. To view your listing, go to Hawaii’s Business Registration Division or Department of Taxation – Tax Licenses.
This is the tax license the state gives you. Make it visible to show your clients that you are a law-abiding and responsible business owner.
This is the tax license the state gives you. Make it visible to show your clients that you are a law-abiding and responsible business owner.

 

What if I need to make changes to my business or to my payments?

There are a lot of things that can happen to your business. Here are some forms that might be helpful.

Name of Form Why Do We Need This Form?
GEW-TA-RV1 Cancel your GET license
GEW-TA-RV5 Make changes to your license (your name, officers, filing frequency)
ITPS-COA Change of address
amended G-45 Amend/change a previous G-45 filing
amended G-49 Amend/change a previous G-49 filing

Hawaii Tax Form List

 

Who doesn’t have to pay? Are there exceptions?

Here is a screenshot of the exemptions if you file online:

ge-exceptions
snapshot of exemptions during online filing of g45

As you can see, most of these exemptions make a lot of sense. For example, if you have bad debts (aka non payment) that means you never received the income, yet it was included in gross billings, so you need to exclude them. Or reimbursements, which if you buy something for your client at no markup as a matter of convenience, then you should not be paying GE tax on that. Non profit organizations is in there as well.

In general, if you have to ask this question, then you probably aren’t exempt from the GET. Entities like Non Profits, utility companies, and some selling securities/commodities are exempt from the GET. See this long document for details (Hawaii Revised Statute 237-23, 12/31/2012).

Organizations looking for GET exempt status would file G-6 (Application for Exempt Status for General Excise Taxes).

Reimbursements: if you paying for something on behalf of a client and there is no mark-up (meaning that you’re not profiting), then the amount is exempt from GET.

Example: I build a website for a client and it requires a special plugin software for $50. I buy it on behalf of my client then I tack the cost onto his final invoice along with the fee for the website. I don’t pay GET on that $50 reimbursement I get from the client.  If I pay $50 for the plugin and charge my client $150, then it’s not a reimbursement and I have to pay GET on the $150.

Out of state sales: if you’re selling tangible personal property out of the state, like, selling hula skirts to someone in Minnesota, the money you get from the sale is exempt from the GET (section 237-29.5(1), thanks Eva for mentioning this). The purchaser needs to fill out form G-61, “EXPORT EXEMPTION CERTIFICATE FOR GENERAL EXCISE AND LIQUOR TAXES” to cerify that they are out of state.

Wholesale customers pay a special rate of .5%.

Insurance commissions (Chapter 431, HRS) pay  .15%

Nonprofits don’t pay on donations received, but must on goods and services sold through fundraising.

 

Do Nonprofits pay no General Excise Tax?

Yes for donations received, but businesses can still pass their GET onto a nonprofit. Also, update: nonprofits still pay general excise tax on monies received from fundraising events because they are selling goods and services.

Registered nonprofits are exempt from paying GET on their business income. However, if that nonprofit contracts a business, then the nonprofit may be paying that business’ GET.

 

Example:

A church receives a $10,000 donation (that’s business income for them). The church is a registered nonprofit, meaning it’s GET-exempt, so they don’t pay any GET to the state for that donation.

Then the church hires me to build an online store for them for $10,000. I am for-profit and need to pay GET on my business income. I decide to pass the 4.712% GET onto the church as a surcharge. So, in the end, the church ends up paying me $10,471.20 ($10,000 base + GET surcharge). Then I put aside the $471.20 to pay to the state when time comes to pay my GET.

 

What is a wholesaler?

Wholesalers get a special GET rate of .5%.

What’s a wholesaler? Someone who sells goods in bulk to other businesses to sell for retail. An example would be an electronics company, who sell and deliver mass electronics to places like Best Buy, Radioshack, or Walmart. Wholesalers usually have smaller margins than retailers because they make money on large quantities of transactions, which is why the tax rate is lower for them.

If you’re selling to customers or end users, you are not a wholesaler.

Do rates change if you’re a sub-contractor?

If there are subcontractors involved, no there is not an endless tax on every subcontractor in the chain. Rather, the the sub-contractor working directly with the end customer(s) will be charged the full rate, while the transaction between the sub-contractor and contractor is at a lower rate of .5%.

Answer from DAVID W RISTAU CPA‘s conversation:

Roland: “I am a contractor. I use subcontractors.The build in their 4.5% GET on their invoices to me. I do the same with my invoice to my client, including paying 4.5% GET on the amount of subcontractor cost built into my price. So the state is collecting at least twice (maybe more, since the subs buy materials from local businesses). No wonder the state is bankrupting local businesses.”
David Ristau: “If you’re being charged 4.5% by your subs, something is wrong in the preparation of your returns. The subs should be charging you 0.5% GE tax and you charge your end customer 4.5% and deduct the sub-contractors on your GE filings via Schedule GE to report the subs. State isn’t bankrupting businesses because of incorrectly prepared and filed GE forms…the small business is shooting itself in the foot by not seeking competent help in preparing the GE forms.”

 

Additional Reading

Big article right? If you have more questions, you might want to look at these articles:

Passing On Hawaii’s General Excise Tax Not Possible for Some by Lowell Kapala, Hawaii Reporter

Oahu County Surcharge FAQs by Hawaii Department of Taxation

FAQs by Hawaii Department of Taxation

General Excise Tax License Required for Business Activity by Fred Pablo, Hawaii Tax Director

Tax Facts 96-1: General Excise Tax vs Sales Tax by Hawaii Department of Taxation

Tax Facts 97-3: Starting a Business, Licenses and Taxes by Hawaii Department of Taxation

O’ahu stores can tax up to 4.712% by Greg Wiles

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Disclaimer / Last Note: I am not a tax professional nor do I work for the Hawaii tax department. If you have more questions, look through the comments or call the State Tax Department.

360 comments on “Everything You Need to Know About The Hawaii General Excise Tax

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  1. Glenn, your email unsubscribe boton does not work I am unable to be removed from the blog email list. Can you help?

  2. I am an attorney and was recently let go from my law firm due to downsizing. The firm worked on a contingency fee basis – attorney’s fee was 33 1/3% of settlement/judgment. I was paid a salary. However, for settlements of cases that I brought in personally, I was given a “commission” of 1/3 of the attorney’s fee. This was usually included in my paycheck, with all the usual payroll taxes deducted from the commission.

    Although I am no longer an employee, I am still entitled to the commission when the cases I brought in settle or reach a final judgment. However, because I am no longer an employee, I was told to apply for GE tax license and receive my commissions through that as opposed to getting a traditional paycheck. Question: Do I need to apply for a GE tax license? I am no longer providing services, although some services on the case may have been rendered in the past. Do I apply as a sole proprietor? Can I use my name as a business name or do I need to come up with a special name? What would my tax rate be and what forms would I need to fill out?

  3. I have moved away from Hawaii and no longer conduct business in Hawaii. I left the Island the first week of January of this year (2019) to work on the mainland. However, due to the process of selling our home, my wife remained in Hawaii until March. All business and income this year has been conducted on the mainland. Nothing in Hawaii.

    When canceling my GE account (form GEW-TA-RV-1), do I back date it Dec 31, 2018 or 2019? I had no business in Hawaii in 2019, but I officially left the island in 2019. If I need to date it 2019, do I list my income as “0” since none of the business was transacted in Hawaii, or do I list the actual $ amounts and claim the out of state exemption since the business was registered in Hawaii?

  4. This is such a great resource, thank you for this service! My question:
    I started working for a company last year and received a 1099 misc. I have never been given one of these and reported it when I filed my taxes under my SSN in turbotax. Do I need to get a GE license? I am not a business and only work for this company once in a while. I do not want to get in trouble or audited and my husband says it will throw red flags if I do not have a GE license and are given a 1099.

    1. @Tara C 06-20-2019:
      I’ll presume you are a Hawaii taxpayer for purposes of answering your questions and your husband’s “red flag” concerns.

      The 1099-MISC form you received was for goods or services for which you were compensated (paid) as a non-employee.

      In Hawaii, as a non-employee engaged in business to provide goods or services, you are required to pay a $20 registration fee for a GE tax license and file GE tax returns to report and pay tax on the taxable goods or services your sold or provided to Hawaii customers.

      So, yes, you need to apply for a GE license number and file GE tax return for your business.

      However, you go on further to state “I am not a business and only work for this company once in a while.”

      The number of times or hours you work for this company do not exclude you from being a business. It is a facts and circumstances situation for you. Since you’re not paid a wage or salary with taxes withheld, by default you are a self-employed person engaged in the business for providing a service to the company that pays you. Such payments as a non-employee generally are taxable for GE tax purposes.

      I suggest that you download IRS form SS-8 and complete the form to help you determine if you’re an employee or independent contractor. There are several factors that are considered in determining if you are truly an independent contractor or actually an employee being wrongly categorized as an independent contractor so that the paying company does not properly pay payroll taxes on your earned wages.

      I believe your husband’s red flag concern is based on the fact that on Hawaii income tax form N-11 for Hawaii residents, on page 4 of the form you are to provide a description of your business and your GE tax license number.

      And yes, the state is getting better at matching missing GE license numbers of taxpayers and sending an invoice for GE tax owed plus penalties and interest.

      When using Turbotax to prepare your income tax returns, be careful not to include the 1099-MISC income as wage income on your Federal tax return. Rather, it is supposed to be reported on either Schedule C or C-EZ or as “other income” if you’re not engaged in a trade or business.

      I suggest you talk to a tax professional prior to filing your Turbotax return to ensure you’re reporting the 1099-MISC income correctly.

      Best Regards,

      David W Ristau CPA

  5. Hi,
    I noticed your differentiation of GET as a surcharge, not a state sales tax… I’m setting up my quick books, and it asks if I pay state sales tax… should I say no?

    I wonder how I should handle GET in quick books in regards to what I owe, what I’ve paid, and what I can deduct or exempt…

    1. People handle this in different ways… you might want to ask a CPA how they do it. What I do in my accounting/invoicing program (Wave Accounting) is I register 2 types of sales taxes: 4.712% (GET) and 0% (exempt). Each line on my invoices can have a tax selection. Before paying the state, I just look up the report that categorizes the amount of sales (pre-tax) applicable to either tax category.

    2. @Alexander 06-09-2019:
      For many of my clients, I’ve found it easier to not use the sales tax routine in QuickBooks, and include the GE tax collected on a separate line of the income statement.

      Within Quickbooks you can set up a line item for GE taxes to match your needs, depending on county you’re selling to or if wholesale or out of state.

      Your post does not list the type of business you have nor the possible exemptions you’re eligible to claim.

      I suggest you discuss your specific situation with your tax professional and/or someone well versed in setting up Quickbooks accounting for answers to the “how do I do this” part of your question.

      Best Regards,
      David W Ristau CPA

  6. I pay water/sewer and electric bills for my long-term tenant in a SF home directly to BOWS and HECO (not via HOA, etc.) and it’s written into the lease. Since I do not add any mark-up on those costs and therefore make no profit on those costs can I deduct those costs before paying GET on the balance of gross rental income from my tenant?

    1. GET is on gross receipts, unfortunately, and not on profits (so you could be losing money on your rentals, but still need to pay GET). However, the GET you pay can be counted as an expense, since you’re taking them out of your rent receipts (and not passing them to the renters, and act as a collector for the state). The one thing I’m not sure of is if the property is in SF, are you supposed to pay GET, which is meant for the privilege of doing business IN HAWAII. Try ask the Hawaii Tax Dept and let us know.

    2. @SandyR 05-28-2019

      While the amounts you collect for water/sewer and electric bills are part of your gross receipts, there is a provision in the HI GE statutes, allowing for exemption of reimbursed expenses, without mark-up, from GE tax.

      HRS section 237-20 and HAR 18-237-06 are the substantiation of the exclusion.

      If you rely on this statute and administrative rule, you must not add on so much as one penny to the cost of water/sewer or electric to pass on to your tenant or else the entire amount becomes taxable to you for GE tax at 4% plus county surcharge.

      Assuming you pass on the water/sewer an electric to your tenant without mark-up, the amounts received from your tenant are expense reimbursements and thus not includable as a factor of gross receipts for purposes of GE tax filing.
      Which means you do not include the reimbursed expense in column A of form G-45 and G-49 and do not try to claim a deduction in column B, nor do you report the reimbursed expense as an expense on your rental income tax form, most likely form 1040, schedule E, page 1.

      I personally use this approach with many of my Hawaii tax clients for their income and GE tax reporting purposes.

      I suggest you contact your tax professional and discuss with that person if HRS 237-20 and HAR 18-237-20-06 apply to you. Further, if the tax professional disagrees, please ask them to cite where in the HRS and HAR you are not allowed to treat the reimbursed item as a reimbursement without mark-up for your property rental business.

      Best Regards,

      David W Ristau CPA

  7. What if the company makes 40k for the year but 30k went to non-employees which I sent a 1099-MISC form too? Do I still have to pay the GET on the full 40k? Where do I write off all the money I paid the non-employee?

    Also for Hawaii if you receive a 1099-MISC you have to pay GE taxes. Does that mean that non-employee has to pay the GE tax AGAIN after the company paid for it on it’s G-45’s?

    I would love some help. Thank you!

    1. Hi Melani,

      I just got off the phone with TAX DEPT about responsibilities over GET for primary/sub contractors:

      1) list what you keep/earn as revenue (column A)
      2) list what you pay out as exemptions (column B)
      3) your subcontractors in Hawaii will pay GET on what they earn

    2. @Melani 04-16-2019:

      Ron is correct in his answer that you list the total amount received (40k) in column A of the G-45 and list the amounts paid out to your sub-contractors, (30k) in column B, to result in net taxable receipt to you $10k, IF YOU ARE A LICENSED CONTRACTOR or ARCHITECT AND the SUB-CONTRACTORS ARE LICENSED SPECIALTY CONTRACTORS in the construction trade.
      (My emphasis added).

      If you’re not in the Construction industry, then you pay GE tax at retail rate unless your end sale is to an outside of Hawaii business and delivered to an out-of-state location and you’re allowed a deduction for out-of-state sales.

      For non-construction sub-contractors, you could furnish form G-61 to your sub-contractor thereby exempting their sale to you form GE tax, or charge you a whole services GE tax of 0.5% tax rate on their invoices to you.

      The mechanics of the GE taxes owed by each party are thus:

      1. If you’re in the construction industry, your company pays retail GE tax rate on the net 10k you’ve received and you list each construction industry sub-contractor on Schedule GE to exclude your payments to your sub-contractor. Your Sub-contractor is liable for retail tax on the invoices to your company (30k).

      2. If you’re not in the construction industry, your company pays retail GE tax rate on the full 40k you’ve received and your sub-contractors pay 0.5% wholesale services tax on sales to your company. Yes, there is a slight double GE taxation in this scenario.

      Quoting you: “Also for Hawaii if you receive a 1099-MISC you have to pay GE taxes. Does that mean that non-employee has to pay the GE tax AGAIN after the company paid for it on it’s G-45’s”

      Answer: If you receive a 1099-MISC, you report the amount as part of your gross receipts. Whether you pay retail or wholesale or no GE tax for the dollars listed on the 1099-MISC is determined by the facts and circumstances of the payments you received. (Your out of state sales may be included on the 1099-MISC received from an out of state customer and possibly not subject to GE tax at all.)

      The “non-employee” pays GE tax on its gross receipts at the appropriate retail or wholesale or no tax rate, again, as determined by facts and circumstances.

      In order to answer your question exactly, additional information is need from you to answer for your specific facts and circumstances.

      I suggest you have a follow up conversation with your current tax professional and/or a call to HI Dept of Taxation or myself via email.

      Best Regards,

      David W Ristau CPA

  8. So in regards to people who make money through Google Adsense (via YouTube or hosting ads on their own websites), there are no transactions that happen on your end, you have no customers, you’re not actually providing a service either. You publish content online, and then Google can decide to place ads on it and give you a cut. Any transacations with ad companies themselves are all done on Google’s end.

    I called a couple tax consulting offices in Hawaii and they told me that, especially since Google isn’t located in Hawaii, you’re not conducting business in Hawaii and thus are not liable for the GE tax.

    They said I should still have the regular $20 business license and report my income on the G49 form but claim it all as exempt due to being out of state.

    Does this sound correct to you?
    (Makes complete sense to me personally, but I also know when a state wants your money they can sometimes dig their heels in and act unreasonable.)

    1. I don’t think I’ve seen literature on the topic… mainly b/c an online business exists online, unless you have an office here or are doing business with Hawaii businesses (e.g. Amazon charges GET and travel/hotel companies were found to be owing $ to the State b/c they didn’t pay GET).

    2. @MK 04-13-2019:
      From your comments, I’m presuming that you are receiving the Google adsense payments from Google as an independent contractor.

      I agree with the other tax consulting offices you’ve contacted that the proceeds aren’t liable for GE tax and that you need a GE license to report the gross receipts as well as deduct the entire Adsense proceeds as out-of-state sales.

      Unless the state can prove nexus between you and Google, you aren’t liable for GE tax payment on the Adsense payments to you. Not a situation of digging in heels or acting unreasonably. Law is quite clear and in favor of you not owing GE tax on sales outside of Hawaii.

      Best Regards,
      David W Ristau CPA

      1. That’s correct David, I get the standard 1099 that Google issues to people who earn money through AdSense.

        Good to hear you agree with the other advice I’ve already received! Makes me less fearful of an audit, although sounds like worst case I’ll just have to fight the audit and the law should be on my side anyway.

        Regardless, glad I can proceed with the next tax year without worries, thanks.

  9. Hi Ron,

    I read through most of the comments. Here’s one I couldn’t find – I’m a mainland business with sub contractors in HI. The customer, end user, is set up to pay the excise tax and they have always done this. Should I just continue this way?
    Thanks!

  10. Hi Ron,
    Many thanks, you sure are one smart guy!
    Here’s my story – Small S corp. on mainland. Provide data clean up service through 3 sub contractors (living in HI) to a HI utility. 12 invoices p/yr. Pay subs monthly, submit annual 1099’s to them, our mark-up is a small percentage (=30k), but annual compensation to subs is greater than 100k. If we pay GET, aren’t we paying tax on wages?

    1. Hi Gee, this reminds me of the primary/sub contractor responsibility question I just answered. If youre located on the mainland, with no “nexus” or office (that’s the words the tax dept used), then you’re not really doing business in Hawaii. Your subs are, so they should be paying GET on what they earn. I don’t know your situation, so you can call the tax office and explain your company situation and they can better determine if you are considered “doing business in Hawaii.”

    2. @Gee 04-03-2019:

      You state in your post that your company annually has less than 200 transactions and your “markup” is only $30k.

      I will presume that the $30K is in addition to the sub-contractor payments greater than $100K and your billings to your utility company exceed $100k per year.

      With collections from your end customer in excess of $100k, including the invoiced sub-contractors, you do have nexus for filing GET returns with Hawaii to report GE tax owed on the entire $130k+ invoice amounts.

      Your sub-contractors may invoice to you as an out of state business if the delivered product of their work is to you at an out of state location and not collect GE tax from you for their services to your company. However, it is possible that the services they are providing to you will be delivered directly, or without much alteration, to a business located within Hawaii. If the latter situation describes your situation, then the sub-contractors should invoice you at a wholesale service rate, rather than exempt from tax, provided your company in turn pays retail GE tax on the delivered product to your customer.

      You aren’t paying any tax on wages to the sub-contractor because by definition, sub-contractors are not legally your employee. You further reinforce the sub-contractor status by not withholding Federal, State income, FICA and Medicare taxes form the compensation you pay your sub-contractors.

      The tax you are paying is an excise tax on the seller for selling a service or tangible property within the state of Hawaii. You’re paying a GE tax on services you’re selling to your end Hawaii customer, in this case, a utility.

      You as the seller have the option to “pass on” (add) the GE tax to your Hawaii customer as an additional line item on your invoice to your customer, or to not add the tax on your invoices as a separate line item.

      The GE tax you pay itself is computed on your gross receipts, including GE tax collected, at 4% retail or 0.5% wholesale rate. In addition to the state retail GE tax rate, several Hawaii counties collect a surcharge GE tax for services or retail goods sold within their respective county. No surcharge applies to wholesale sales.

      Be sure to include island surcharges in your GET computations for services delivered to the utility.

      Best Regards,

      David W Ristau CPA

  11. Hello,
    I’m a freelance photographer. I filed and paid for a G-45 for Dec 31, 2018. I later realized I made a mistake by overstating my income. So I filed an amended G-45 and paid the correct amount. Now I see I have a positive (+) balance on my HiTax homepage and am unsure how to get my refund. When filling out the G-49, how do I input data from my G-45’s including the amended return?

    1. I can’t 100% remember the G49… but the idea is to see if your GET payments during the year with G45 match up with year-end G49 (since refunds, cancellations, mistakes happen), … if you overpaid, there should be a “Credit to Be Refunded” on the G49 online form. https://hitax.hawaii.gov/

    2. @Dre Madrid 03-28-2019

      Ron’s earlier answer sums up the filing and refund process.

      The G-49 annual reconciliation should be prepared with the correct taxable income and the actual G-45 tax payments, penalty and interest paid during the year, LESS any interim refunds received from HI DOT for amended G-45 filings.
      If at the time you prepare the G-49 and you have not received the amended G-45 refund, then the overpayment is reported again on the G-49 form and the G-49 form will effectively cancel the prior amended G-45 filing and the refund will be mailed as shown on the G-49 return, presuming no other tax liabilities are outstanding.

      And, remember that you can amend your G-49 filing, too, in case you’re seeing an overpayment for that form that you’ve not received.

      Best Regards,
      David W Ristau CPA

  12. This is a very helpful post, I still have a couple questions I wonder if any readers can answer:

    For out of state sales you mention “the purchaser needs to fill out form G-61, “EXPORT EXEMPTION CERTIFICATE FOR GENERAL EXCISE AND LIQUOR TAXES” to cerify that they are out of state.” – how does this apply to out of state/out of country internet sales? The customer can’t fill out the form…

    Also, if I sell some items retail and some wholesale, do I calculate the GET I owe using both rates and report on the same G-45 form?

    Finally, is there any cloud/online accounting software that can produce the semi annual G-45?

    Thanks!

    1. I’m also interested in this. We sell on eBay, and are considering moving to Hawaii. Almost 100% of our sales would be to other states. Would we need to have every single customer fill out that form in order to get the exemptions? If so, then we can’t do it. We have thousands of customers.

      1. I sent the following email to the Hawaii Department of Taxation. Not sure if they will respond.

        I have read Tax Information Release 98-5 regarding tangible personal property shipped out of the state.

        We run an eBay business and would move our business to Hawaii. We would ship almost everything we sell outside of the state; we have thousands of customers (we sell collectibles like postcards and stamps).

        Release 98-5 says that we would have to get a certificate from each purchaser in order to qualify for the exemption. This would be impossible. Release 98-5 also mentions “other documentation” which would be acceptable. Would a simple list showing all of our customers and where the items were shipped to be sufficient, or we need to obtain a document from every customer?

    2. @Ross 03-22-2019 and @Adam 06-23-2019:

      G-61 exemption certificate was last revised in 2018.
      The legal answer to your question is yes, the purchaser needs to prepare and furnish form G-61 to the Hawaii business to allow the Hawaii business to claim an exemption from GET tax.

      However, reading the instructions for form G-61, you’ll find that the HI DOT will accept an “alternative form or document’, “in the event the form G-61 is impracticable to complete” provided the alternative document includes the information requested in form G-61 parts I, II and III.

      I believe that by slightly editing your invoices, you could comply with the “alternative form or document” HI DOT requirement.

      Part I of the form requires the name, address, type of organization, GE license number and description of seller’s business. The company letterhead portion of invoices could be edited to include all the required information.

      Part II of form G-61 requires the name, address and type of organization of the purchaser. This is the addressee portion of your company invoice to your customer.

      Part III of form G-61 requires a description of the tangible property or services provided and a value of those items. Again, a simple listing in your invoice of each item sold or service provided satisfies the Part III information requirement.

      While the instructions for form G-61 are silent as to signature certification requirement on the “alternative form or document” I think that if the invoices are consistently prepared and clearly show the out of state/country addresses, as well as the other required alternative information, then HI DOT will not attempt to collect GE tax on out of state/country sales without an actual form G-61 in your files.

      Adam expressed concern for his E-Bay sales and impossibility of customers furnishing form G-61. In his case the “alternative form or document” approach, with invoices containing required information will negate need for G-61 forms from E-Bay customers.

      Ross, for your in-state repeat customers, I suggest you prepare the G-61 form and send it to your customer for signature.

      Regarding wholesale and retail sales, yes, you compute the wholesale and retail taxes, and applicable retail tax county surcharges, on the same form and make one tax payment.

      I’ve not found any inexpensive cloud software to produce the semi-annual G-45.
      However, both QuickBooks and Sage 50 can be (not-so-easily, IMO) set up to produce reports that you can use to enter the dollars to specific lines and columns of the G-45 form.

      Please revisit this site and post any software that you find that does prepare the information in a relatively easy and economical manner. I’m sure others seeking guidance here will appreciate you sharing the knowledge.

      Best Regards,

      David W Ristau CPA

      1. Thanks for your reply David.

        Interesting idea regarding invoices.

        Our customers pay through paypal, and each transaction has it’s own page which I suppose could be considered a document.

        At the end of each year, we download an excel spreadsheet of all transactions from paypal. It lists all of the pertinent info including the descriptions of the items, the sale price, the purchaser’s address, etc.

        I’m wondering if each line on this spreadsheet could be considered a document, since it literally contains the same information as the individual transaction pages, just in a different format.

        1. @Adam 06-24-2019 query regarding excel file line by line listing summary as substitute for the actual invoices sent to the customers.

          I don’t believe that each line on the spreadsheet could be considered a document for purposes of qualifying as an “alternate document” since the excel sheet summary is not an original source document as are the individual PDF invoices sent to customers.

          I believe it would be best to keep a PDF copy of the original electronic/paper invoices as support document for the summary, preferably in the order listed in the excel summary. Yes, this does add some work to assemble, however, it also is the exact “alternate document” required to receive the tax exemption, provided it has all of the requisite information as stated in the form G-61 instructions.

          Again, I’ll emphasize that nowhere in the G-61 instructions is there a specific mention of a summary list of information as acceptable to exempt the sale from GE tax. On the contrary, the instructions state clearly the requirement for a substitute document (singular) that provides the same information as the form G-61 for each customer or out of state sale.

          1. Thanks David.

            Here is the reply from the Hawaii Department of Taxation.

            “As stated on the instructions for Form G-61, in the event the Form G-61 is impracticable to complete, an alternative form or documentation may be used provided the information requested in Parts I, II, and III of the Form G-610 are maintained. So long as you keep records to substantiate that the sales are to customers located outside of Hawaii, then you will be able to claim the out-of-state sales exemption.”

  13. Hi David,
    I am an insurance agent receiving commissions from my employer as well as my regular salary. I have been filing my Annual GE tax based on my commissions and paying only the Insurance commissions of 0.15%.
    My concern is that I pay and file once a year (using Form G-49 only) as the tax is so minimal. Do I have to pay the 4% as well under Commissions? Have I been filing my Annual return correctly?

    1. @Ash Yamamoto 03-15-2019:
      The insurance commissions GET tax rate is 0.15%.
      There is no 4% GET tax liability on the insurance commissions.

      Technically you’re supposed to be filing the G-45 periodic returns as well as the annual G-49 reconciliation return.

      I suggest for year 2019 and follwoing that you file the G-45 returns.
      You mention in your post the tax is “so minimal”, so I presume you will be filing G-45 returns on a semi-annul basis.
      With the new computer system in place, I’ve notice HI Dept of Taxation contacting more people asking them to file the periodic G-45 returns in addition to the G-49 they’ve usually filed.

      Best Regards,

      David W Ristau CPA

  14. Aloha David,
    We recently inherited a house in Oahu that my dad owned before he passed in Feb 2018. The house has renters in it and my dad paid the 2017 GE taxes. I recently got a GET license to pay the tax on the rental income for 2018. The GET license is a sole proprietorship with my sister as an officer.

    Now when I file my 2018 federal taxes, can the rental income be claimed between my sister and me or do I have claim it all? Also, do I have to file Hawaii state taxes since I live in Virginia?

    Mahalo,
    Tony

    1. Hi, I wanted to chime in on this topic, since David is probably busy with tax season: with family-type situations, it is an implied 50/50 partnership, but your agreement might be different. And if you pay all the mortgage and upkeep, you definitely can be viewed as more than half. You should work out the agreement with your siblings, so each person knows what to report. See Rev. Rul. 71-268 for more information on this particular scenario.

    2. @Tony 02-10-2019:
      In your post you state “we” inherited a house…renters in it…between my sister and me…”
      I’ve omitted the interim words in my quote.
      How is the house titled?
      If titled in Tony and sister as joint owners, then it is permissible to file tax returns claiming 1/2 of the income and expenses on respective income tax returns. This then follows to Hawaii GET filings that Tony and sister each have their own GET license and number and report their respective 50% of the gross rental income on GET return filings.
      If the rental property is titled as a partnership or a LLC, (I highly doubt it is titled through a corporation), then the partnership or LLC registers for GET license and account number, the GET filings are in the name of the partnership or LLC, and neither Tony or sister report anything to Hawaii on GET filings. Tony and sister will report the net rental income and expenses from the partnership or LLC from the K-1 forms they receive each year from the partnership or LLC.

      Regarding filing of HI income tax return by Tony, VA resident, the answer is yes, you do have to file a HI income tax return for the rental income/(loss) of the Hawaii rental. Consult with a tax expert in your area to prepare the required HI N-15 filing form for Tony. Also, if the property generates a loss, remember to keep a schedule of Hawaii net operating losses for carryforward to future years if or when the property has a net income year so that the loss carryforwards are applied to the current income year.

      Best Regards,

      David W Ristau CPA

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