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).
  • 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 10/18/2014

Disclaimer: 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. Do not ask me for 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.

 

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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.


BigCommerce: The easiest way to sell online!

 

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 Due 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)?

The business and GET registration process is very easy, thanks to the state making the entire process available online. You can do it in person or mail your forms, but it’s much easier to just fill out some forms online, make a payment online, and then just wait for your license to come in the mail.

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

  1. Register your business with the state of Hawaii (link here). 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.
  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?

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 selling securities/commodities are exempt from the GET. Certain See this long document for details (Hawaii Revised Statute 237-23, 12/31/2012).

Reimbursements: if you paying for something on behalf of a client and there is no mark-up, 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.

Wholesalers pay a special rate of .5%.

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

 

So Nonprofits pay no General Excise Tax?

Yes, but businesses can still pass their GET onto a nonprofit.

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 a beer company, who sell and deliver beer to bars, grocery stores, and restaurants. 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.

 

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

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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.

About

Ron Lum has been running a web design and development business in Hawaii since 2012. In the past, he has worked as an English teacher in South Korea and in the audit department at a local, public accounting firm. He is always learning, earning, or sharing ideas on this blog or on online communities, such as Quora. If Ron sounds like someone you'd someone you'd like to work with on a website project, visit his web design site and fill out the contact form.

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124 Comments

Randi Nov 15, 2014

If you charge the customers a surcharge for the GE tax, do you list your gross income including what you collected for GE tax on your state and federal taxes and then write them off as an expense, or do you simply only claim what you made (not including the tax you collected and already paid to Hawaii)?

I am not really sure if it even makes a difference, considering you called it a wash, but if it is a surcharge I don’t know if it is considered an expense.

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Paul Davidson Oct 27, 2014

If anyone needs to fill out a form 1099-MISC, I found a blank form here http://goo.gl/BjM4EW. This site PDFfiller also has some tutorials on how to fill it out and a few related tax forms that you might find useful.

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Christine Sep 16, 2014

Hi Ron,

Thanks for your helpful information. I live in Hawaii and I am starting a business as an internet affiliate marketer, meaning I get a percentage commission from every sale that I bring to a company. I work mainly with large mainland-based companies, like Amazon and Bed, Bath & Beyond.

Since I am not selling products directly to customers (and therefore, will not be collecting any sales tax), will I need a GE tax license?

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Ron Lum Oct 18, 2014

It sounds like “no.” The GET is all about business transactions in Hawaii. For you, those transactions are happening outside the state. However the affiliate commissions would be part of your regular taxes as part of “wages, commissions, tips, etc”. But keep up with Hawaii tax news because online transactions are tricky and not all states have come up with a way to deal with them yet.

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Aungki Oct 22, 2014

Hi Ron,
I’m a bartender, work on tips and get paid by cash daily. Do I need to get an GE lincese in order for me to pay tax?

Mahalo

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Ron Oct 23, 2014

The main point here is to see if you’re an employee or an independent You get w2s? If so you’re an employee not a business so you do not pay general excise taxes

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TaxesBoo Sep 8, 2014

For services I perform as an indep. contractor & where I’m paying my own GET, you said the GET is a deductible business expense for Federal purposes… does Hawaii State also let you deduct it as an expense when you file for income tax purposes?

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Simone Sep 2, 2014

I received my ge tax liscence in maui in spring 2012 but never used it. Am I going to be in trouble & if so what to do? Sign, very confused girl.

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Rene Aug 20, 2014

Hi Ron,

Thank you for the informative information. If you pay GET on a rental, do you still have to claim the total rental fee on your income taxes (as earnings) and pay taxes on it again with your year end tax return? (This will also bump up your tax bracket I’m assuming…) Mahalo!

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Daniel Jul 22, 2014

We have changed the name of our business and I’m having trouble finding all the forms I should file with the state and feds. Any recommendations? Thank you

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Trevor Alt Jul 18, 2014

Thank you Ron.

This is a summary of my understanding after just completing my first set of Hawaii tax returns for my vacation rental condo. I emailed this to myself so I can find it whether or not I’m at home when I have to prepare my next returns. While this may be useful to others at least in gathering information, I’m not very confident that my understanding is entirely correct, and nothing can substitute for the advice of a qualified Hawaii tax professional. If it turns out I’ve made a mistake, I can file amended returns.

The Hawaii tax structure for vacation rental proceeds is complicated and confusing and there of current information available online is sparse. Much of what is out there on the internet (perhaps even on the State of Hawaii’s own website) is incorrect and/or outdated. Some information given to me by a well meaning person who answered the phone when I called the Department of Taxation turned out to be incorrect. Be careful. It pays not to try to figure it out and prepare your returns at the last minute – there are severe penalties (5% per month on unpaid liabilities) and interest involved if you aren’t on time. I had until July 20 to get my returns for the period ending June 30 postmarked.

I registered my business and obtained my Hawaii state tax ID number right away, in fact I filed the application electronically 2 weeks before I closed escrow on my Maui condo. Hawaii law requires the Hawaii tax ID number to be visible in all advertisements and in contracts. If someone needed to register their business with the State, here is a link: https://hbe.ehawaii.gov/BizEx/home.eb.

Here is the state guideline for completing the Transient Accommodations Tax (TAT) Return: http://files.hawaii.gov/tax/forms/2013/ta1ins.pdf – GET and TAT taxes visibly passed on to paying guests are EXCLUDED from gross rental proceeds for purposes of the TAT, so those amounts do not appear anywhere in the TAT return.

Here is the fillable PDF form for the TAT Return (Form TA-1): http://files.hawaii.gov/tax/forms/2010/ta1_f.pdf

Here is the best guideline for the General Excise Tax (GET) that I’ve found so far: http://www.ronswebsite.com/blog/hawaii-general-excise-tax/ – GET taxes at 4% are included in gross “transient accommodations rentals” that are claimed on the GET return. The effect is that you are paying GET taxes on GET taxes. This is very confusing. It means the effective GET rate is actually 4.16%. GET and TAT taxes visibly passed along to renters (itemized and not just lumped in with a total charge) are an “exemption/deduction” from the gross “transit accommodations rentals”.

Here is the fillable PDF form for the GET Return (Form G-45) http://files.hawaii.gov/tax/forms/2008/g45_f.pdf

Here is the fillable PDF form for the GET Exemption form (Schedule GE) that MUST be filed with the GET Return to avoid disallowance of the exception for GET and TAT taxes visibly passed along to renters: http://files.hawaii.gov/tax/forms/2013/g45ge.pdf

Here is the fillable PDF form for the tax payment voucher – you must fill one out for the GET payment check and another one for the TAT payment check: http://files.hawaii.gov/tax/forms/2012/vp1_f.pdf

Owners can register to file all the forms electronically and make payment by bank debit for $1 (credit card has a 2.4% fee + some additional fixed dollar fee): https://dotax.ehawaii.gov/efile/html/FAQ.html

Here is the link to the Hawaii Department of Taxation alphabetical list of tax forms: http://tax.hawaii.gov/forms/a1_1alphalist/

Here is the form to change the filing frequency for GET or TAT – frequency of filing depends on the annual tax liability (e.g. you file quarterly for GET if your annual GET tax liability will be more than $2,000 but less than $4,000. You file monthly for TAT if your annual TAT liability will exceed $4,000): http://files.hawaii.gov/tax/forms/2009/gewtarv5.pdf

You must file an annual TAT return/reconciliation – here is the state instructions http://files.hawaii.gov/tax/forms/2013/ta2ins.pdf
Here is the annual TAT return/reconciliation fillable form: http://files.hawaii.gov/tax/forms/2011/ta2_f.pdf

You must file an annual GET return/reconciliation.
Here is the annual GET return/reconciliation fillable form: http://files.hawaii.gov/tax/forms/2008/g49_f.pdf

NOTE: I (and apparently most Honua Kai owners that advertise on VRBO) have been listing the sum of TAT and GET taxes on our ads as 13.416% (which represents 9% TAT and the effective GET rate of 4.16% and that is the amount I am actually passing on to guests. However, the actual TAT rate is in fact 9.25% which means that I’m eating that .25% at least on my first set of returns mailed 7/18/2014)

My GET return, payment voucher, and check were mailed to:
Hawaii Department of Taxation
P.O. Box 1425
Honolulu, HI 96812-1425

My TAT return, payment voucher, and check were mailed to a different address:

Hawaii Department of Taxation
P.O. Box 2430
Honolulu, HI 96812-2430

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Ron Lum Jul 21, 2014

Trevor, thanks for the info. I as well as other people that read this article appreciate it. I plan to make some needed updates to this article soon and maybe also tackle a TAT article, because it seems to be a big area of confusions as well.

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P Kauai Sep 26, 2014

Hi Ron,

What deductions are allowing for GET? I received 1099s with the amount of $ I spent on supplies…was not my income…just got reimbursed for supplies I bought for the client. Can I deduct those? It doesn’t seem fair that I have to pay GET on an amount that was clearly not income at all.

Thanks!

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Ron Lum Oct 18, 2014

Hey P, reimbursements are exempt. I am adding it into my article now. If you file online, there’s a column for exempt amounts.

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tlynnk Oct 17, 2014

I love your blog Ron. It is very informative.

Do I have to pay tax on my TAT like I do on my GET? If so, what is my combined GET and TAT rate on Oahu?

T

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Kaori Jul 17, 2014

I want to file my GE. I am a bartender and I get paid with tips. (No hourly wage/no paycheck) I work at a bar but am considered a sole proprietorship. How would I file my taxes? Thanks

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Ron Lum Jul 21, 2014

Kaori, for federal taxes, the money you make as a freelance bartender flows through onto your 1040. Same idea for state taxes. You might get requests for W-9 filling, which your clients file with the IRS to track the money you make. For general excise tax, you have to register yourself and then file it, separately from the above 2.

So… I can get a free drink next time I’m at your bar? K thanks eh.

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Abby Jul 17, 2014

If i am supposed to pay GET semi-annually and i started receiving income from renting my condo in Feb. Do i still need to pay at the June and Dec time periods, or do i pay the end of the 6 month period from when i started earning income?
If anyone can answer this question, i would appreciate it.

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Ron Lum Jul 21, 2014

It’s based on when your tax year starts. Many people use the calendar year aka January 1 is the start of the tax year.

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katrina Jul 16, 2014

I have a spa whereby which I contract with Independent contractors. I collect on their behalf the payments. Contractually, we have agreed that I will pay 4% on my gross commissions and they will pay 4% on their gross or their 1099. For instance, if an ic makes $10,000 gross, then they will owe $400 GET. Some of the Ic’s insist that they are wholesalers, and as such are only obligated to pay .005 GET. Of course, this is after the fact, after signing the contract, after working under this agreement for many years, in some cases. This is a source of great contention. What constitutes a wholesaler?

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Ron Lum Jul 21, 2014

You should ask a CPA for the best answer… but I “wholesaler” status is for a person with a certificate or license in the state they want to distribute in. Try look up form g17, g18. I think it might also be called “seller’s permit.” So that’s something you’ll need to ask them for and to fill out to verify that they are indeed wholesalers.

Even though you folks have a contract in place, you folks can amend it if there is an area of mutual agreement, namely if you decide that the tax numbers changing. In terms of the general tax liability, each party should have their own, unique tax liability based on their own gross receipts during their own respective tax periods — their tax liability is their own responsibility.

Note: I am not a qualified tax expert. My opinion is not substitute for professional tax advice.

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Melody Loudin Jul 14, 2014

Is a physical location in Hawaii required if we offer consumer loans via the internet in Hawaii.

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Kim Jul 2, 2014

Quick and easy question, I think. We are located in Texas. We only have one client in Hawaii. We invoiced this client in March, but have not yet received payment. We file GET every 6 months. Do I have to pay tax on the invoiced amount or do I wait and pay tax when we receive payment from client? Thanks!

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Ron Jul 3, 2014

Nah, the GET is based on gross receipts, as in, you actually got paid and sent them a receipt of payment.

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Molly Jun 27, 2014

Hi, On your state taxes, can you write GE taxes off as a business expense?

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jlo Jun 11, 2014

i am a consultant giving advise to a client who owns a rental community in waikiki. They are paying my corporation in Texas. Do i have to collect the GET tax from them ?

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Ronson Jun 20, 2014

If your business is located in Texas, then Texas state tax laws would apply, not GET. The Hawaii GET is for businesses registered to do business in Hawaii. Your client would probably have to pay GET on the rent money she collects though. Makes sense, right?

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victoria ayala May 21, 2014

aloha ron!

i just wanted to say THANK YOU!!! After seemingly countless hours of trying to locate all the information presented here, i found u!!! i don’t even need to ask anymore questions because they were already answered here! i truly appreciate the clarity u provide and the easy to understand terminology, not to mention ur polite humor and straight forward attitude.

THANK YOU!!!

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marrisa May 7, 2014

GET is very confusing, thank you for this article! If I pass on GET to clients (4.712% 4.166%) when I file & pay G-45 form I pay ONLY the amount that was passed on to the client correct? Some articles make it sound like I have to pay tax on top of tax! If that is the case, wouldn’t it be better to not pass on GET to client so gross income is less and just pay the 4% and 4.5% rate? Thank you so much in advance!

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Ron Lum May 28, 2014

Marrissa, you actually do pay GET on GET. If you charged your customers 4.5% for GET (Oahu), then you’d still have to pay 4.5% on that 4.5% GET. But people simplify by either charging customers 4.712% OR by not adding a GET but instead paying GET out of the money from the sale.

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Joy Jul 16, 2014

Hi Ron, I am filing my G-45 for the first time. My rental management company charged the customer %4.166 of the total revenue. However, when I enter the total revenue in the e-file form it automatically fills in a GET rate of %4. Any suggestions? Who would’ve thought it would be so complicated. Your site is the most informative I have seen. Thanks, Joy

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tiffany davis-shaw Apr 23, 2014

Ron, I am non resident and was told that the tax my landlord charges me on my rent could be reimbursed on n-15 form for state taxes. Smile, n Smh. I am having issues with getting my money- any suggestions

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Jon Apr 18, 2014

Ron.
I am not sure how to get this answer back to you (I promised I would) so I am just posting it here. Feel free to reformat and repost if needed.

QUESTION (to you and to State):
“I am an independent professional consultant (scientist) reporting my GE Tax taxable consulting income on Form-45. I have been reimbursed for travel at no mark up cost to my customer which I have been told is GE Tax exempt since it was separately invoiced and at no mark up.
Question: How do I report this reimbursement on my Form 45? Do I include it in Column A (Gross) and then take the exemption in Column B and file Schedule GE? If so, under what HRS paragraph does that fall with respect to the Schedule GE categories?”

RESPONSE from the SoH:
“Aloha,
Please reference to HAR 18 at http://files.hawaii.gov/tax/legal/har/har_237.pdf, it provides that “the reimbursement of a cost or advance made for or on behalf of one person by the taxpayer shall not constitute gross income to the taxpayer, unless the taxpayer receiving such reimbursement also receives additional monetary consideration for making such cost or advance.”
The department of taxation issued regulations interpreting this change as Hawaii Administrative Rules section 18-237-20. The Reimbursement exemption applies when:
1) Taxpayer pays a cost or advance to Thrid Party;
2) For or on behalf of Reimbursing Party; and
3) Taxpayer is repaid the cost or advance and receives no additional monetary consideration for making the cost or advance.
Mahalo
Jenny
Taxpayer Services”

So, that’s the answer! Critical part is “…receives no additional monetary consideration for making the advance.” I fortunately invoiced my customer separately for the travel stating that no markup was added so it is clearly an “advance” as defined by the SoH GET law.

Thanks for the wonderful site.
Jon

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Ron Lum Apr 22, 2014

Hey thanks a lot Jon. I’m going to include this useful bit of info in my next update.

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TEEC Apr 17, 2014

I went and got my General Exersice license about 4 years ago and
never did anything with it. Is it still good or do i have to get another one? I looking in to trying to start up my business full time now. What do i need to do?

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Kavika Apr 16, 2014

I live in Hawaii, but do research and writing for a single client in New York. I’m paid as a contractor. Since all off this work is for someone out of state, whom I only communicate with via Skype, email, and phone, is this different from the commenter below who teaches guitar to people on the mainland by Skype? Is what I do subject to GET?

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Dave Apr 15, 2014

Ron,
Your information is excellent and clears up a lot of the confusion about this tax.
I have one very simple question. When it says that the (quarterly) tax is “due” on, say, April 20, does that mean actually received by the tax dept. or simply post-marked by that date?
Thanks for your reply.
Dave

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Ron Lum Apr 22, 2014

Hey Dave, just do things ahead of time…and you will never have to worry about the answer :).

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Judy Apr 3, 2014

Hi Ron,

This is one of the most helpful article about GET out there. Thank you for sharing. I got my GET license last year as a requirement to be a registered interpreter. I was so busy with my full-time, I ended up didn’t take any translation job. Do I need to file GET tax? Will there be a penalty fee for late filling even if I didn’t have any business income? Thank you.

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Ron Lum Apr 3, 2014

Judy,

The late penalty is a % of what you owe. SInce your business made $0, well

$0 x (whatever the late fee % is) = $0 you owe

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Jon Mar 31, 2014

Ron,
I was vague with my the previous question.
The question should have been written as:
“Do I record all income (Gross) in Column A and report this reimbursement as an ‘exemption’ in Column B to get my taxable income (Column C)? “

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Jon Mar 31, 2014

Ron,
I did some consulting work (I have license, etc.) and got reimbursed for travel costs (invoiced at cost, no markup). I’ve been told that this reimbursement is exempt from GET since there is no markup. How do I report this on my filing?
Do I just not report this income on the G45? (doesn’t seem correct)
OR
Do I take record all income in column A and report this income as an “exemption” (Column B) to get my taxable income (column C)? (Columns A, B C form G45). If I claim an exemption I need to file Schedule GE (Schedule of Exemptions and Deductions) … but under what HR237 paragraph do I claim this exemption?

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Ron Lum Apr 3, 2014

Jon,

Large reimbursements are usually associated with employees. The fact that they reimbursed you for a flight essentially translates to them paying you an amount (in addition to your work fee) equivalent to your travel expenses. It’d be the same if you were to buy a car and then have them reimburse you for it as part of a work negotiation. Well, basically, that car is part of your payment and thus needs to be considered part of your income. This is a key difference in employee vs contractor determination — bosses take care of employees’ stuff, but an independent contractor is expected to provide their own things (supplies, tools, software, travel expenses, classes, etc). However, the instructions for GE45/49 do not mention reimbursements for independent contractors, so I am just hypothesizing here. Best to call the State tax department… and hope they have a tax expert that has a firm stand on the issue.

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Jon Apr 4, 2014

Ron,
Thanks. I already have a call into them.
From past experience in the 1980s and 90s when I served on committees for NASA, etc., and got paid honoraria and reimbursement for airfare back to where ever, I reported only the honoraria, if I ever got that, but I can’t remember the who, what, why and how of the justification. I would never have bothered to go if I had to pay 4% just for the honor of traveling away from HI – NASA was not going to reimburse me for a GE Tax line added onto the travel reimbursement request. Anyway, when I find the answer I’ll let you know. There must be others out there with the same issue, unless they just tack 4.5% onto the cost of the ticket and their customers are OK with that.
Jonathan

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Ron Lum Apr 4, 2014

Couple things I want to add:

1. Reimbursements have no real effect on federal income tax, as the expense and reimbursement amount offset.

2. The Ge tax is only for doing business in Hawaii. If they flew you out to California to consult with a client there, then your earnings on that outside-of-Hawaii project would not be taxable by GET (though you’d still have state taxes as a resident of HI).

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Jon Apr 4, 2014

Ron,
Good point about the out-of-state aspect w.r.t. reimbursements and GE tax. Maybe that’s what the rational was years ago. I’ll still research and let you know.
The income tax/business deductions is pretty straightforward/common sense as you point out.
Great blog!
Jon

Andy Mar 30, 2014

How do i look up what I owe if i didn’t pay GET for a couple years?

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Ron Lum Apr 3, 2014

You don’t look it up. You calculate it yourself. It’s based on what you made (gross).

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maureen Mar 29, 2014

Hi ron,
I was wondering how to change paying GET from 3 months to 6 months? My husband just got his GE license and while signing up he chose the 3 months. Are we able to change it online or is there someone we have to contact? Pls help.
Thank you.

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Ken Mar 26, 2014

Hi Ron, thanks for the article. I just signed up for a sole proprietor license from your link.

My question is if the amount of GET I owe is small, do I still have to pay semi-annually (they didn’t have an “annual” choice during the signup)? Or can I just pay once a year using whatever the annual form (G49?) is?

Mahalo

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Tiki Mar 17, 2014

4.5% Tax on the 4.5% tax business collects for the State!?!?
WTF
And why is Insurance rate so low…Funny how they and the State have a similar racket.
“The General Excise Tax (GET) is levied against a business’s gross receipts for the privilege of doing business in Hawaii.”
Yeah. Privilege to make a living and eat!
Thank you my overlords.
King & Queens didn’t die…they just changed clothes.

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Ron Lum Mar 18, 2014

LOL. Thanks Tiki for cheering up my day with your rant/commentary.

The 4.712% is pretty steep. It’s also on gross receipts, so businesses with low margins are absolutely gutted. But that’s the cost of doing business in Hawaii. I think we all either have to accept it, move to another state (hellooo Nevada) or do business “off the books.”

With that said, have you heard the news that Hawaii mayors want the option to slap on another 1% for the GET? Time for me to either become an employee or plan to move states…

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Jeffrey Thomas Mar 14, 2014

Hey Ron, good article and a painful subject for some. I just found out from a tax accountant that my business is one that would be exempt from GET.

I teach guitar, bass and ukulele on skype and do not have a single transaction from a student located in Hawaii.

I plan to reside on Oahu and was told that since the “sale” of my lessons is happening to a student not on Hawaii I am exempt. This is great news and I feel the GET is very uncool.

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Robyn Mar 10, 2014

I started off my business paying taxes semi-annually. Now that the business is growing, am I able to change to quarterly, or do I have to keep it at semi-annual? (I still pay less than $500 in taxes semi-annually but it’s still a lot for my small budget)

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Jim Mar 9, 2014

Ron,

My wife and I recently purchased a condominium that we are renting to occasional tenants for which we will be responsible for paying a Transit Accommodation Tax and a General Excise Tax. We pass through both the TAT and the GET, as well as the expenses for the cleaning serve we use after each rental.

In reading materials from the State, it appears that we can deduct the passed through TAT and GET amounts, as well as the passed through cleaning fees when we file out TAT return. However, while it appears that we can deduct the passed through TAT tax when filing out GET return, I do not see that we can deduct the amount of the passed through GET or the passed through cleaning fee (although we pay passed through GET to the cleaning service). As an aside, we have not been charging our tenants this additional passed through GET surcharge that we pay to our cleaning service.

Is there a deduction that I am missing, or are we only allowed a deduction for the TAT that is passed through to our tenants. From your excellent explanation, I can wrap my head around not being able to deduct the passed through GET, but I am having trouble understanding why we may not be able to deduct the passed through cleaning fee.

Thank you for any guidance you can give us.

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Jim Mar 9, 2014

Ron,

As an addendum to my query, above, in the alternative, is the passed through cleaning fee to our tenants considered income at all for purposes of calculating our GET on our condominium rentals? It appears that it clearly is considered income for purposes of filing the TAT, because we can deduct it from our gross proceeds. However, it now occurs to me that perhaps it is not income at all for purposes of determining our GET.

Can you shed any light on that angle as well?

Thank you.

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Ron Lum Mar 15, 2014

Sorry Jim, but your question is complex and expands far beyond the scope of my article. If you need a referral to a CPA who knows the GET, I can help, but otherwise, you should contact the appropriate tax departments.

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Melanie Legaspi Mar 4, 2014

This is awesome information Ron! I’m thinking of starting a retail website but I wasn’t sure about the rules. Is having a GE license all I need to get started? And what about paying taxes, should I pay for it or charge the customer?

Thanks a lot!

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Ron Lum Mar 7, 2014

Melanie,

Registering your business and getting that license are the biggies. If you plan to do business as something other than a sole-proprietor, choosing the right type and filing the right papers would be important too.

As for who to pay the GET, read the section “Should I make my customers pay the excise tax?” It’s in big, bold letters, just for you sistah!

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Jon Mar 3, 2014

Ron,

I have loaned money personally to my c corporation of which I own 100 % of the stock at the minimum required interest. When it is returned to me, am I required to pay Hawaii GET on the interest or is that just ordinary interest income taxed at whatever my current tax percentage is? I am not in the business of loaning money. Thank you.

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Ron Lum Mar 7, 2014

Jon,

That’s a difficult series of questions to which I do not have the answers to. I would recommend consulting with a CPA. Let me know if you one. I could refer you to a knowledgeable one.

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Jasmine Mar 2, 2014

Hi Ron,

I applied for a GE license few month ago for a marketing business but since things have changed, I will be doing computer teaching class instead. Can I use the same GE License?

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Ron Lum Mar 7, 2014

The license is assigned to a business. If you are a sole-proprietor (a person-business), then you can use the same license. A business can make money doing many things.

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Harrison Feb 28, 2014

Do I still need to filled Taxes if we never make any income from our business for the parts of 2012 and the whole 2013. We started having income from the beginning of this Month February 2014.

Mahalo

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Ron Lum Mar 7, 2014

Yes, you need to at least fill out the G49, the annual, and let them know you made 0.

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Jacqueline Feb 25, 2014

Hello,
So I talked to one CPA on kauai and he told me just to get a get license for tax purposes. He said that I didn’t need to start a business, just to have a seperate checking account for keeping track. We own a second property and are planning on renting it out. Is this correct and do I need a business?

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Ron Lum Feb 25, 2014

You can operate as a sole-proprietor, which means that you and your business are one and the same and that your income from your rentals just go on your regular, individual tax return (except you fill out a schedule.. I think A? to report rental income). Meanwhile, someone who creates an LLC for his rentals would have to file a return for himself and another separate return for his LLC.

Also, Jaqueline, you should follow your CPAs advice. Afterall, he does taxes for a living. Me, I’m a guy on the internet. CPA > guy on internet. If you do need another CPA in the future for taxes or bookkeeping on Oahu, let me know and I could refer you to someone.

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shaun Feb 22, 2014

Ron,
I have a ge tax license from doing real estate in hawaii about 7 years ago, but I now need to pay ge tax for a rental property i own there. Can I use the same ge tax license i already have or do i need to file for a new one since it is a different business?

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Ron Lum Feb 25, 2014

The licenses are assigned to businesses or individuals. If you are operating under a new business, you’ll need a new license. If the license was assigned to your name and not a business, then you can use the same one. If you are the same business but your details have changed, like address or filing period, you can fill a form to amend your license info.

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Ron Lum Feb 25, 2014

Hawaii has no sales tax. In it’s place is the general excise tax. It serves a similar purpose (taking a cut of business transactions), but it works a bit differently. So you don’t charge your customers any sales tax.

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Carrie Feb 4, 2014

Hi Ron,

If our company is selling some tangible goods to a customer located in California and they are tax exempt (resellers) but the goods are shipped to Hawaii, should we charge/collect the general excise tax from them? Are they still tax exempt on the goods like when the goods are shipped to other states?

Thanks very much for your help.

Regards,

Carrie

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ron Feb 25, 2014

theres an exemption for out of state exports for tangible goods. they have to fill g61 form though to verify that its out of state.

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Jon Feb 3, 2014

I did occasional consulting for many years back in the “last century”. From 2000 to 2007 my GE Tax was “$0″ (no consulting income) which is the last year I filed. I’ve been asked to do some consulting (starting Jan 2014) and need to catch up on my GE Tax filings – my check of myGE Tax license number online says my tax license is “open” which I assume means still active.
Question 1: Do I need to file a return for each year ’08 – ’13 or just one return for 2013?
Question 2 (assuming I need to file each past year separately): Do I need to file the semi-annual as well as the annual return & reconciliation, that is, 3 separate returns for each of those years?
Thank you a great blog!

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ron Feb 25, 2014

if you go by the book,you need to at least file an annual g49 for your get. even if its zero, cause not filing suggests that you may have getaxes owed and are late with payments. filing the annual lets themknow you filed and, made zero.

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Joni Jan 31, 2014

Tangible item sales seem to be exempt from resale transactions to the Dept of Defense in Hawaii properties but are professional services also exempt from the .5%. Can you tell me which tax announcement I should review to understand these tax exemptions?

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steve Jan 30, 2014

Hi Ron. Thanks for the excellent explanation about the GET. I have a question that I think I already know the answer to: I have a Utah company that performs IT consulting work for clients all over the country. Two of its primary employees reside in Hawaii and provide consulting services to non-Hawaii clients (through the Colorado company) while in Hawaii. Is the Company required to collect GET for the services provided by these employees?

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Elizabeth McDonald Jan 30, 2014

HI there,
My husband is an “independent” contractor. He is a charter boat captain who gets 1099′ed from the company he works for. the company pays him and not the customers. does this count as a business does he need to pay the GE

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Ron Lum Feb 3, 2014

Yes. 1099s are what companies file when they work with freelancers or independent contractors, both of which are considered businesses, so yes, he needs to pay GET.

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Ben Jan 29, 2014

Hi Ron,
I just noticed that the link you have for business registration is no longer working (Page Not Found). Any idea what the new one is?

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Laura Jan 28, 2014

My husband and I are looking into starting an etsy shop with things we both make online. If I have a GE license does he need one too?

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Ron Lum Jan 29, 2014

Laura,

Depends on your business classification. If you’re a “sole proprietorship”, he’d need to be an employee and then wouldn’t need a license. Or if he’s an independent contractor for your business, he’d need his own license. A lot of husband/wife businesses operate as a partnership, in which case there’d be a single license for their business and not for any 1 person. Or you might qualify to be a “joint venture”… see the IRS link below.

http://www.irs.gov/Help-&-Resources/Tools-&-FAQs/FAQs-for-Individuals/Frequently-Asked-Tax-Questions-&-Answers/Small-Business,-Self-Employed,-Other-Business/Entities/Entities

If you’re thinking about the best tax situation / business classification for a married couple, you should definitely consult with a CPA.

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Monica Wessinger Jan 27, 2014

I and my busness reside in CA. I received a purchase order for installation of cabinets in Oahu from a company located in New York. I sent my men to Oahu, they installed the cabinets and I were paid from the company in New York. Do I pay GET taxes on that income?
I apprecite your help,
Monica

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Ron Lum Jan 29, 2014

Monica,

That is a super difficult question and I recommend you consult with a CPA. Reason is this: although it sounds like a simple cross-state, CA-NY transaction, the same was thought of mainland travel companies selling Hawaii hotel bookings to mainlanders planning a Hawaii vacation. Those businesses and their customers were not in Hawaii, but the hotels were. The state of Hawaii eventually sued those travel companies for excise taxes not paid and won.

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Gino Jan 13, 2014

Thank you for all this info!

I’m from California and I received a bill from a local freelancer who performed services for me while on a job in Hawaii. That invoice includes an excise tax. As a general rule, we don’t charge sales or income tax on freelance invoices- work is usually done at a flat daily rate. Am I required to pay this excise tax?

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Ron Lum Jan 14, 2014

Gino,

The GET is not a sales tax. It is applied to business transactions in Hawaii. Some businesses pay it out of their own gross sales but most tack it onto their client’s invoices as a surcharge (meaning the client pays the GET).

You were in Hawaii and hired a local to do work for you? If so, then yes, that excise tax is something that needs to be paid. It’s the same as you paying excise tax on your hotel fee, car rental, or when you bought food in Hawaii.

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Caramiagurl Jan 5, 2014

Hi Ron,

I wish your blog on this topic was around eight years ago! About eight years ago, I spent hours on the phone and in person at their windows to get the same answers and make sure I understood the process, obligations, and requirements.

So now that I have established a small business under services for independent contract work, my question is, can I use the same GET license for a different type of “service?” For example, say I’m using my current GET license to do massages (service). But, now I want to teach massage as an independent contractor or be a presenter (on a different topic) hired as an independent contractor. Can I use the same or will I need to open a new one?

Thank you in advance for any light you can shed on my situation.

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Ron Lum Jan 5, 2014

Caramia,

I honestly believe that if tax instructions were more clear, then more people would be paying taxes. Cause when things are easy, people are more likely to do them.

As for your question, the license is assigned to a business. A business can have many streams of income. Me for example, I develop websites, but I also do website tutoring, consulting, and a couple times I’ve helped clients with computer problems. It’s different stuff, but all of that money goes towards my business.

So, if you are making money as the same business in both cases, then you only need 1 license. In fact, I’ve seen some companies register a business alias (DBA) and they do several things that are not related at all. Same company though.

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Kauaisteve Apr 18, 2014

I was at the State Dept Taxation yesterday and was told that I needed to file the form GEW-TA-RV5 to change the NAICS business code to reflect the nature (type) of my business. So, one cannot change their nature of business and just assume all is pono with the tax authorities. That makes sense since GET tax rates vary as you have noted. It is #5 on the form. If in doubt, consult a tax professional.

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Richard Dec 17, 2013

do you charge tax on online purchase from customer in and shipped to another state.
We are in Waimea Kauai and want to sell a t shirt to someone online in California

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Ron Lum Dec 19, 2013

Richard,

Yes, you will be paying GET if you are selling T-shirts. If you are doing business in Hawaii, the GET is simply a percentage of your gross sales, no matter where your customers are from.

What you’re thinking about is sales tax. GET is not a sales tax. How cross-state sales tax would work is if you had a store in California (legally referred to as a “physical presence”), then you would be collecting sales tax from that customer’s sale.

Hope this helps.

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Eva Feb 1, 2014

I have a feeling that’s this is incorrect. Form G-45 has an exemption for out of state sales, code 237-29.5(1) which specifies goods will be shipped and used out of state. I’ve been selling online for 3 years and I’ve never had to pay GET from out of state sales.

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Ron Lum Feb 1, 2014

Thanks Eva. I’m going to be doing an update to the article soon when I have time. Appreciate your insight… you even pointed out the clause!

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Eva Feb 1, 2014

You’re welcome. I would be very interested in your update! I know about Hawaii getting money back from companies like Expedia, but ultimately those tourists came here, versus when you ship out of state the goods leave the state altogether. Great article Ron. Mahalo.

Mom Dec 17, 2013

My friend has a very small one man business. His business got slow and he got behind in paying his GE taxes because he wasn’t bringing in very much money and after he paid rent, his phone and gas, there was nothing left to pay the tax. What would the procedure be for him to try and catch up on his GE tax?

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Ron Lum Dec 19, 2013

Hi “Mom,”

Before I answer, I just want to say that your question points out a problem with the GET: it’s a tax on gross sales, and not profit, so that means even if you lost money, you still have to pay GET.

Moving on… one thing about falling behind on taxes is that the tax guys expect payment. So if you suddenly stop paying, they’ll notice and they might come after you. I say “might” because some businesses don’t pay enough GET for the tax guys to care. If your friend was paying a lot of GET and he suddenly stops paying, then he should be worried a bit.

One of my clients, a restaurant, fell behind on their GET. The client was grossing a lot per month, so they were required to pay GET monthly. When they stopped paying due to hard times, the state then revoked their liquor license and that messed things up for their business.

So, my suggestion is to catch up ASAP. He will also need to pay interest on late payments as well.

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Chris Dec 6, 2013

Hi Ron , Thank you for the useful info. I have a rental where I live on the Big Island . I did not know I had to pay get . This goes back 2 years . Any advice on how to amend this ? Aloha Chris

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Ron Lum Dec 7, 2013

Chris,

I’m sure many people doing business or running rentals in Hawaii don’t know that they have to pay the GET. Have you heard the news of the state going after Online Travel Agents for hundreds of millions in unpaid taxes (link)?

I can’t say for sure what would be the best approach here. Here’s my suggestion:

1. Register for a license (instructions are in this article).
2. Pay the back taxes you owe. You may also have to pay interest or late fees on the balance you owe.
3. Start incorporating the GET into your accounting.

Talk to my CPA friend Jack (site) if you need more guidance.

-RON

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Jane Dec 2, 2013

Thanks so much for your helpful info. Couldn’t find it anywhere else! Do you happen to know how much I would have to charge in GE tax if I rent my condo on Maui short term?
Thanks!

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Eileen Oct 21, 2013

Thanks for the 411. It’s very clear. My husband has a small business, a single-member LLC with the fiscal year ending in 9/30. The business has been operating at a loss since it started last year. This year I’m doing his bookkeeping and filing his G45. I would like to change the fiscal year to the calendar year. Do you think I can get away with deviating from the business application and change to a calendar year without changing paperwork?

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Ron Lum Oct 23, 2013

Eileen,

I’m glad that it’s clear for you. As for your question, I suggest that you formally request a change of information with the tax department. It’s likely you’ll have to fill out a form and wait for them to approve. I don’t recommend changing without notice because if you change your FY dates, that changes when your payments would be due (both GET and regular taxes). And if the state tax dept expects payment at a certain date because of the FY they have on file and they don’t payment, that might raise a flag with them.

The above is just my opinion. If you really want more insight on the topic, you should consult with my CPA friend, Jack (http://www.windwardaccountant.com/).

Also, here is a bit on due dates on the G45 instructions:

Due Dates
Form G-45 is due on or before the 20th day of the calendar month following the end of the filing period. For example, if your filing period ends on January 31st, then your return will be due on February 20th.

Form G-49 is due on or before the 20th day of the 4th month following the close of the tax year. For taxpayers on a calendar year, this return will be due on April 20th.

NOTE: If any due date falls on a Saturday, Sunday, or legal holiday, substitute the next regular work day as the due date.

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Lorel Lee Oct 17, 2013

Hey Ron, since you do online services for clients I have a quick question for you. Let’s say someone from California or Arizona wants you to build their website and you receive income from those clients. Do you have to pay state taxes in CA and AZ? I just moved to Oahu and I’m trying to figure this out.

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Ron Lum Oct 17, 2013

Lorel,

Good question. I think cross-state business is always a confusing topic and thus, a good topic to discuss.

To answer your question, we follow the flow of money. If I reside in Hawaii and a CA person hires me, their money comes to me, and thus, that business transacts in Hawaii, thus it’s tax money for Hawaii (GET). If I hire someone in CA, then the money goes to them, that business transacts in CA, thus it’s subject to California state tax (I think ~7%), but not the Hawaii GET.

In terms of state taxes, you pay taxes to whichever state you are technically a resident of. Those resident laws are super confusing so you should definitely consult with a CPA familiar with cross-state or cross-country commerce and have them assess your unique situation.

-RON

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Shelli Oct 8, 2013

mahalo plenny for the useful info…and the recommendation for the tax person. I want to start a small business but have little knowledge about how all this works, so this really helped me :)

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Ron Lum Oct 13, 2013

You’re welcome Shelli. Small business owners need to wear a lot of different hats , but it’s still a good idea to consult with a CPA or other professionals like lawyers or business coaches who can help give you a head start on doing business. I actually wishes I had hired a business coach when I first started… instead I just started from scratch and that’s really doing things the hard way.

-RON

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Danielle Sep 26, 2013

Aloha Ron,
My husband is law enforcement, but sometimes he is offered “off duties”, which are jobs where he is paid by check by the company hiring him to do things like traffic control. He is not being paid by they county like his paychecks so there are no taxes taken from his check, does he need to get a GET ID?

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Ron Lum Sep 26, 2013

Hi Danielle,

The answer is probably “yes.” Here’s why:

If you’re an employee (you work for someone), your employer automatically takes care of the tax stuff for you, so you only need to file your taxes once in April. As for the General Excise Tax, it doesn’t affect employees, because it’s aimed at business transactions.

If you’re an independent contractor (you work for yourself), no one takes care of the tax stuff, so you have to do it yourself. An independent contractor (aka self-employed aka freelancer) is a business, so that means each business transaction (selling goods or providing services for money) are taxed by the state via GET. The GET is separate from regular taxes on gross income, by the way.

I hope this helps. Contact a CPA or call the State Tax Department if you need more help.

- RON

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Danielle Sep 27, 2013

That’s what I thought. Mahalo for your help and your awesome site!

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Mike Aug 23, 2013

Ron,

This is one of the clearest explanations of an opaque tax. I finally understand why businesses add 4.712% to most sales, even when the GET is set at 4.5% (on O’ahu).

Just one thing: “Jerry Maguire” ordered the chicken katsu, not the loco moco :) Since the lunch truck provided him with loco moco (not katsu) and he will most likely return the purchase for a refund, does that mean the business will return 4.5% or 4.712% in tax surcharge? If the former, does the business have to pay GET on the difference?

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Ron Lum Aug 23, 2013

Mike,

The GET is part of the sale. A refund would negate the sale. The money from the purchase would be refunded, including the GET surcharge. And you would not longer need to pay the state GET on that refunded item.

Oh, and thanks for catching that mistake. I must’ve been hungry for Zippy’s when I wrote that example.

-RON

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david Aug 10, 2013

hi! thanks for the helpful info!

do you know how to close/cancel your g.e.t. license permanently?

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Ron Lum Aug 12, 2013

David,

I believe that these tax licenses expire naturally. This also means that they can expire and that people need to renew them.

Otherwise, if you’re wanting to close your license and get off the tax registration database, then you should call the Department of Taxation at (808) 587-4242. I’m sure there’s a wonderfully painful process for you to go through to close the license.

-RON

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richard odiorne Aug 8, 2013

I sent in my GE tax obligation but have not received my cancelled check. I do not want to be charged late fees. I want to know if you have processed it or are running late. My tax ID #
is 00040242-01

Reply
Ron Lum Aug 12, 2013

Richard,

I don’t work for the tax department – I’m just a regular contractor that wrote this article to educate people.

You need to call the State Tax Department at (808) 587-1540.

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Billy Aug 3, 2013

Anyone know if we have to pay fed taxes on the GET as it does appear as Gross Income

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Ron Aug 5, 2013

In terms of taxable income, GET should have no effect if you’re having your customers pay the max GET.

Let’s say you sell $60,000 worth of goods (not including GET) and you tacked on 4.712% GET for your customers. That means you’ve collected an additional $2,827.20 from sales. However, you have to pay all this additional money to the state as GET. So…

$60,000 (gross sales)
+ $2,827.20 (GET surcharge)
- $2,827.20 (GET expense)
= $60,000

It’s a wash, Billy.

However, if you pay GET yourself and not as a surcharge to your customers, then that’s going to be business expense which will lower your taxable income.

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