Do You Need to Get a Sales Tax Permit in Hawaii?
Quick Answer: Sales tax in Hawaii is referred to as “General Excise Tax”. You need to get a General Excise Tax permit in Hawaii if you meet economic or physical presence nexus requirements. General Excise Tax is different than sales tax in that sales tax is a tax on customers, while General Excise Tax is a tax on businesses. Businesses are not required to collect this tax from their customers, but it is common for a business to pass this tax on to the customer.
For more information about Hawaii’s General Excise Tax, see Tax Facts 37-1.
What is Sales Tax Nexus Anyway?
Your business owes sales tax in any state where it has “sales tax nexus”. In short, if you have sales tax nexus you need to collect and remit sales tax. If you don’t have sales tax nexus, you generally don’t need to get a permit.
Sales tax nexus is a legal term that means you have crossed a threshold and now have a sales tax collection responsibility in the state. Nexus can be created by having a physical presence, an economic presence, or by other factors. Nexus rules vary by state and retailers have specific nexus rules based on where they have people, property or inventory.
What Should You Do Once You Determine You Have Sales Tax Nexus?
Once you determine that you have sales tax nexus in Hawaii, your next step is to register for a General Excise Tax permit in the state. Check out our blog post on getting a General Excise Tax permit in Hawaii for more information about that process. If you are not interested in doing the work of getting the permit yourself, TaxValet can handle the permit registration for you with our Sales Tax Permit Registration Service.
Common Ways to Have Sales Tax Nexus in Hawaii
1. Economic nexus in Hawaii
If you made $100,000 of sales OR more than 200 transactions in Hawaii, then you are required to register for and pay general excise tax to the state. You are not REQUIRED to collect tax from your customers, but if you fail to do so, you are still liable for the General Excise Tax due. If you meet this threshold, it does not matter if you have a physical presence in Hawaii. Nexus has been created based on your volume of sales. For more information, please see SB 2514.
If you need help determining which states you have crossed economic nexus thresholds, check out our Sales Tax Starter Kit service.
2. Physical presence in Hawaii
The following creates physical presence nexus in Hawaii. If you have any of the following in Hawaii, you will need to get a General Excise Tax permit:
- An office.
- Employees or representatives.
- Inventory or other property in Hawaii.
- Provide services in Hawaii, such as installation, training, maintenance, or repair services.
For more information about physical presence in Hawaii, see Dept. of Taxation Announcement No. 2018-10.
If you need help determining which states you have a physical presence in, check out our Sales Tax Starter Kit service.
Free State Audit Risk Guide
See which states pose the greatest risk to your business.
State-by-State Audit Risk Percentages
Do You Need a Sales Tax Permit in Hawaii If You Only Sell on Marketplaces?
Hawaii is not a currently a marketplace collection state, however, marketplace collection laws will take effect on 1/1/2020. Amazon, eBay, and other marketplaces are currently NOT required to collect or pay sales tax in Hawaii. Therefore if you meet nexus requirements, you, as the seller are responsible for collecting and remitting tax due on sales into Hawaii and must get a General Excise Tax permit.
Once marketplace collections begin in Hawaii, you will still be required to get an Excise Tax permit and file General Excise Tax returns, although the marketplace will remit the tax.
For more information about marketplace sales in HI, see SB No. 396.
If you are an e-commerce seller who is unsure of where you need to get a sales tax permit, check out our Sales Tax Starter Kit service. In fact, if at any point you are stuck and want a team of experts to handle all of this for you, don’t hesitate to contact us.