If I pass GET on to my customers, why is the right rate 4.712 percent and not 4.5?

The 4.712 percent figure accounts for the fact that Hawaii’s General Excise Tax applies to your entire gross income, including the GET you collect from customers. When you pass on exactly 4.5 percent, that passed-on amount becomes part of your taxable gross receipts, so you owe GET on the GET itself. This leaves you short on every transaction.

Here’s a simple example. You sell $1,000 of services and add 4.5 percent as a visible pass-on. You collect $1,045 total. Your gross income for GET purposes is $1,045, not $1,000. At 4.5 percent, you owe $47.03 in GET. But you only collected $45.00. You’re $2.03 short on this single transaction, and that gap adds up quickly across a full year of invoicing.

The 4.712 percent rate closes that gap. Mathematically, it’s the result of dividing the tax rate by one minus the tax rate (0.045 ÷ 0.955). At 4.712 percent, you collect $47.12 on a $1,000 sale, and your GET liability on the full $1,047.12 works out to roughly that same amount. You’re made whole. Businesses working with Fractional CFO services that understand Hawaii tax mechanics get this set up correctly from the start.

This 4.712 percent figure is the maximum visible pass-on rate allowed in all four Hawaii counties where the combined state and county rate totals 4.5 percent. Charging more than 4.712 percent means overcharging your customers, which can result in penalties.

A couple of practical requirements apply. The pass-on must be shown as a separate line item on your invoices. It should be clearly labeled so customers understand what they’re paying. You cannot simply raise your prices to absorb GET without proper disclosure.

This tax-on-tax effect catches many Hawaii businesses, especially those new to the state or working with mainland accountants unfamiliar with GET mechanics. Proper Hawaii GET compliance requires getting the pass-on rate right on every invoice and every filing.

The rates and rules referenced here are current as of this writing but should be verified with the Hawaii Department of Taxation. If you’re uncertain whether your invoicing and filings reflect the correct pass-on rate, reach out to schedule a consultation.