Why is Hawaii's GET not just a sales tax with a different name?

The General Excise Tax looks like a sales tax because businesses often show it on receipts and invoices. But GET operates on an entirely different principle, and understanding that principle is the single most important tax concept for any Hawaii business to internalize.

A sales tax is collected from the customer and remitted to the state. The business acts as a pass-through. GET is levied on the business itself, on its gross receipts. The business is the taxpayer, not a collector. Whether or not you pass the cost to your customers is your choice, not a legal requirement. This distinction changes everything about how GET affects your cash flow and your books.

GET applies to nearly everything you do. Most states exempt services from sales tax. Hawaii taxes services. Most states don’t tax business-to-business transactions because they’re trying to avoid tax pyramiding. Hawaii taxes B2B activity at a lower rate, but it’s still taxed. Whether you’re a contractor billing another contractor, a consultant invoicing a corporate client, or a retailer selling to the public, you owe GET on those receipts.

The word “gross” matters. GET is calculated on your total receipts before you deduct expenses. Your rent, your payroll, your materials cost, none of that reduces your GET liability. You can operate at a loss for the month and still owe GET on every dollar that came in. This catches mainland business owners off guard more than anything else. Sales tax is only owed when you make a taxable sale. GET is owed when you have receipts, period.

If you pass GET to your customers, that passed amount increases your gross receipts. You’re taxed on the tax you pass along. This is why the visible pass-on rate is slightly higher than the actual tax rate. Businesses gross up the amount to cover the tax on the tax.

The base retail rate is 4%, with most counties adding a surcharge that brings the combined rate to 4.5% or higher. Wholesale and intermediary transactions are taxed at 0.5%. Getting the classification right matters because the difference between 4.5% and 0.5% on substantial B2B activity is real money. Hawaii GET compliance requires accurate income classification and timely periodic filings throughout the year.

For Hawaii businesses, GET isn’t a once-a-year consideration. It’s an ongoing obligation built into the rhythm of your accounting and advisory services. If your books aren’t structured to track GET properly, or if you’re new to Hawaii and trying to understand how this all works, schedule a consultation to talk through your situation.