Sales tax is a tax imposed on the retail sale or lease of tangible personal property and certain services in Hawaii. The state general excise tax (GET) rate is 4% for most transactions. In addition, Hawaii’s four counties impose a county surcharge on the state tax, ranging from 0.5% to 3.5%. This means the total sales tax rate in Hawaii ranges from 4% to 4.716%, depending on which county you are in.
Sales tax is collected by merchants from their customers at the time of purchase. The merchants then remit the sales tax revenue to the state. Sales tax applies to most transactions for tangible goods, but exemptions exist for items like unprepared food and prescription medication. Services may also be exempt from GET depending on the type of service.
In this comprehensive guide, we will cover everything you need to know about Hawaii sales tax, including:
- How to calculate sales tax in each county using a sales tax calculator
- Exemptions – what’s taxable and what’s exempt
- How sales tax revenue is administered and used by the state
- Sales tax licenses and filing requirements for businesses
- Key sales tax holidays when no tax is charged
Understanding Hawaii’s sales tax rules and exemptions is important for consumers and businesses alike when making tax-related decisions. Properly calculating, collecting, reporting, and remitting sales tax is also essential for businesses to remain compliant.
Hawaii Sales Tax Calculator
To easily calculate sales tax in Hawaii, you can use an online Hawaii sales tax calculator:
- Enter the cost of each individual item you purchased
- Select the Hawaii county where the purchase was made
- The calculator will apply the correct tax rate and give you the sales tax amount owed
- It also totals the order with tax for the full amount due
Hawaii Sales Tax Calculator
Hawaii Sales Tax Calculator
Sales tax calculators can handle orders with mixed taxable and non-taxable items across multiple counties. They simplify sales tax math, eliminating the need to manually look up rates or compute percentages.
Online calculators provide sales tax estimates only. The exact tax is calculated by merchants at the time of sale based on precise order details and the buyer’s location.
Calculating Hawaii Sales Tax
The first step in calculating Hawaii’s sales tax is to know the total state and county tax rates based on where the sale occurs. Here are the combined state and county sales tax rates in effect as of 2023 for Hawaii’s five counties:
Oahu: 4.5%
- State GET: 4%
- County surcharge: 0.5%
Hawaii (Big Island): 4.4%
- State GET: 4%
- County surcharge: 0.4%
Maui: 4.166%
- State GET: 4%
- County surcharge: 0.166%
Kauai: 4.166%
- State GET: 4%
- County surcharge: 0.166%
Kalawao: 4%
- State GET only, no county surcharge
To manually calculate the sales tax on a purchase in Hawaii:
- Take the cost of the item and multiply it by the applicable tax rate in decimal form
For example, if you buy a $100 item on Oahu, you would calculate:
- $100 x 0.045 (4.5% tax rate) = $4.50 owed in sales tax
When you add the $4.50 sales tax to the $100 item, your total is $104.50.
However, calculating sales tax for orders with multiple items, locations, and taxability can be complex. That’s where a Hawaii sales tax calculator comes in handy.
Hawaii Sales Tax Exemptions
Not all goods and services sold in Hawaii are subject to the full GET sales tax rate. The state provides exemptions for certain types of items and transactions:
Unprepared Food
Food purchased at a grocery store for preparation and consumption at home is exempt from both the state and county GET. This includes ingredients, items like rice or frozen meals, and beverages other than alcohol.
Prepared foods ready for immediate consumption are taxable. This includes restaurant meals, heated deli items, and prepared takeout foods.
Prescription Drugs
Prescription drugs and over-the-counter (OTC) medications approved by the FDA for medical use are exempt from sales tax in Hawaii. The exemption applies to both human and animal drugs.
Non-medicated items like contact lens solution and bandages are still taxable. Medical marijuana with a prescription is also exempt.
Professional Services
Certain professional services are not subject to Hawaii GET. Exempt services include medical care, dental services, legal services, accounting, and financial planning.
Real estate commissions and agriculture support services like veterinarians are also exempt. Creative services like graphic design may qualify for exemption.
Shipping & Handling
Charges for shipping, postage, and delivery on sales transactions are exempt from Hawaii sales tax. This exemption also applies to handling fees.
Product repairs, maintenance, and installation labor services may also be exempt if they are separately stated on the invoice.
Clothing & Footwear
Sales of all clothing and footwear are exempt from the county surcharge portion of Hawaii’s GET. However, they are still subject to the 4% state tax rate.
This “partial exemption” helps lower the tax rate on such items to 4% instead of the full combined state and county surcharge rate.
Trade-Ins
When a product is traded in and applied to the purchase price of a similar new item, the trade-in value is exempt from sales tax.
For example, trading in a used car worth $5,000 when buying a new $25,000 car makes the taxable purchase price $20,000.
Business Input Exemptions
Businesses may qualify to skip paying sales tax on purchases of property, services, and contracting that are inputs for their business operations. Common business exemptions include commercial equipment, raw materials, wholesale goods, and business services like printing or legal counsel.
Hawaii Sales Tax Administration
The Hawaii Department of Taxation administers and collects all state sales tax revenue. The Department oversees tax policies, interprets tax laws and rules, provides taxpayer services, handles audits, and processes tax returns.
Within the Department, the Tax Research and Planning Office analyzes sales tax data and economic conditions to support policy decisions. The Taxpayer Services Branch runs call centers, education workshops, and other initiatives to help taxpayers comply.
Auditors in the Oahu District and three neighbor island Districts perform sales tax audits of businesses to ensure proper tax compliance and identify underpayment. Enforcement measures like tax assessments with penalties may result when deficiencies are found.
On the county level, the state Department of Taxation also collects the county surcharge on behalf of the counties. This simplifies compliance, with businesses submitting a single combined return for state and county sales taxes.
The Department then remits county surcharge revenue back to the appropriate county. The counties can use their surcharge funds for public services and infrastructure in their jurisdictions.
Hawaii Sales Tax Returns & Licensing
In Hawaii, selling taxable tangible personal property or services requires a General Excise/Use tax license. Both local businesses and out-of-state sellers making sales into Hawaii need a license.
After registering for a tax license, periodic sales tax returns must be filed to report sales activity and calculate taxes owed. Returns can be filed monthly, quarterly, or annually based on the business’s total tax liability:
- Monthly returns – For $4,000+ in average monthly tax liability
- Quarterly returns – For $2,000 to $4,000 in average monthly liability
- Annual returns – For under $2,000 in average monthly liability
Sales tax returns are due the 20th of the following month. For quarterly/annual filers, returns for certain periods have different due dates.
Taxes owed must be paid in full each filing period based on sales activity. Electronic filing and payment options help simplify the process for businesses.
In addition to collecting and remitting sales tax, retailers must retain documentation of taxable sales and exemptions. Invoices, tax exemption certificates, and resale certificates should be kept for at least 3 years.
Proper sales tax licensing, filing, and documentation helps Hawaii businesses remain compliant and avoid tax deficiencies or penalties.
Hawaii Sales Tax Holidays
To provide tax relief during busy shopping seasons, Hawaii offers two annual sales tax holidays:
Shop Hawaii Tax Free Week
For one week in August every year, qualifying purchases are exempt from the 4% state GET. The county surcharge still applies, except for clothing and footwear.
To qualify, items must be used for home or personal use, not business or trade. Eligible purchases include school supplies, computers, books, athletic gear, and more.
Dick’s Sporting Goods Tax Free Weekend
On the first weekend of every December, customers can purchase certain items tax free at Dick’s Sporting Goods stores. Both the state and county sales taxes are waived.
Qualifying items cover a variety of sporting goods, from yoga mats to fishing poles. Hunting equipment is excluded from the holiday.
Conclusion
Understanding Hawaii’s sales tax laws is key for retailers collecting tax and consumers making purchases. While the base state tax rate is 4%, county surcharges can bring the total above 4.5% in certain areas.
Exemptions provide tax relief for goods like groceries and medicine along with various services. Knowing what’s taxable at standard rates versus exempt can help shoppers budget and control costs.
Businesses must handle sales tax registration, calculation, collection, filing, and documentation properly at the state and county levels. Tools like sales tax calculators and electronic filing can help manage compliance.
Staying up to date on Hawaii sales tax laws and using available resources allows both businesses and consumers to maximize savings and avoid issues.
