What GET rate does my business actually pay?

The effective rate most Hawaii businesses pay is 4.5 percent on gross income. That combines the 4 percent base rate for retail, services, and most business activities with a 0.5 percent county surcharge that now applies in all four Hawaii counties.

Not every dollar of gross income gets taxed at the same rate though. Hawaii’s GET uses different classifications depending on the type of activity.

The 4 percent rate applies to retail sales, services rendered in Hawaii, contracting, interest income, commissions, and most other business activities. The 0.5 percent rate applies to wholesale transactions, meaning sales to a licensed reseller who will resell the goods. The 0.15 percent rate applies to insurance commissions specifically.

The county surcharge only applies to activity taxed at the 4 percent rate. Wholesale transactions stay at 0.5 percent flat, and insurance commissions stay at 0.15 percent flat, regardless of which county you’re doing business in.

Where businesses get into trouble is classifying their activity into the right category. A contractor selling materials directly to a homeowner is making a retail sale at 4 percent. The same contractor selling materials to another contractor who will install them is potentially making a wholesale sale at 0.5 percent, but only if the purchasing contractor has a valid resale certificate and the transaction is properly documented.

Many businesses have multiple income streams that fall into different classifications. A service business that also sells retail products needs to track and report each category separately. Getting the classification wrong means either overpaying GET or underreporting and owing back taxes plus penalties when the state notices.

The rates themselves are straightforward once you know them. The compliance challenge is applying the right rate to the right income consistently, month after month. As a Maui accounting company that works with Hawaii businesses regularly, we see classification errors far more often than rate calculation mistakes.

These rates represent current information as of this writing, so verify with the State of Hawaii before filing. If GET classifications and filings feel like more complexity than you want to manage yourself, our Hawaii GET compliance service handles registration, classification, periodic and annual filings, and the documentation behind every return.

If you have questions about how GET applies to your specific situation, schedule a consultation to discuss.