Sales Tax Updates in Hawaii

Tax Professionals' Resource
January 16, 2013 — 1,551 views  
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The state of Hawaii levies a 4% sales tax on all business transactions. Any business that purchases, sells, or uses tangible personal property or services in Hawaii incurs liability for a sales or use tax. This tax is calculated by multiplying 4% by the gross receipts of total sales, cost of services, or the renting or leasing of any tangible personal property.

A few reduced rates include a rate of 0.5% for merchants, 0.15% for wholesalers, and 0.15% for state insurance agents.

Responsibility for this sales tax can either be absorbed by the seller for a promotional or negotiation advantage, or by the customer. Significant costs can be accrued whenever a seller opts to absorb sales themselves.

Hawaii has a few guidelines for sales and use taxes that differ from other states. For example, casual sales - transactions that are either infrequent, occasional, or incidental - are completely exempt from sales tax. An example of this would be if a shop owner decides to sell off equipment that is no longer needed to customers or employees. No sales tax would be applied since this equipment isn't part of the inventory and sales records clearly show that the vendor only sells inventoried goods.

While most states completely exempt resale transactions, the state of Hawaii offers a reduced sales tax. The state has three available resale forms that customers can fill in and pass on to sellers for the reduction. This form must be filled out completely. A blanket resale exemption certificate is available whenever there are numerous resale purchases between two parties. These sales are still subject to a sales tax of 0.5%.

A statute is written into law specifically stating that out-of-state mail order and catalog sellers with a physical presence in the state, such as an office or warehouse, or delivery trucks that are frequently in and out of the state, are required to pay a sales tax.

Like most states, a use tax is imposed to offset lost tax revenue from purchases made outside state lines. This tax is assessed whenever items purchased out of state are bought and brought back into the state for storage, use, or consumption. Retailers registered to the state of Hawaii can collect the sales tax themselves. The use tax should be paid directly to the state if the purchase is made from a retailer or service provider that isn't registered in Hawaii


Tax Professionals' Resource