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 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. 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.

320 thoughts on “Everything You Need to Know About The Hawaii General Excise Tax

  1. 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!

    1. 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!

  2. 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.

    1. 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.

  3. 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?

    1. 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.

  4. 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

  5. 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?

    1. 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.

  6. 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?

    1. 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.

    1. 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.

  7. 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

    1. 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.

  8. 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!

    1. 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.

  9. 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?

  10. 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?

  11. 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

    1. 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.

      1. Would Elizabeth’s husband be considered a wholesale services provider and pay general excise taxes at a rate of 0.5% since he is selling his to a business that would then be paying the full excise tax rate on what the customer pays?

  12. 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?

  13. 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?

    1. 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.

  14. 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

    1. 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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