Hawaii is quite literally an island unto itself relative to sales and use taxes.
Hawaii's general excise tax (i.e. sales tax) is a business privilege tax that is imposed on the gross receipts of virtually any economic activity carried on in the state. Whereas most states impose a sales tax on the sale of tangible personal property and only certain enumerated services, Hawaii’s general excise tax is imposed on all sales (absent a few exceptions such as sales to nonprofit organizations).
There is no such thing as a resale exemption in Hawaii.The general excise tax is imposed on gross income, gross proceeds from sales, or value of products in the chain of distribution at differing tax rates depending on the business activity. Generally, the tax rate is 4% on income from retail activities at the consumer level. The rate is 0.5% if the income is from a business activity such as wholesaling, producing, or manufacturing.
The general excise tax is complemented by a use tax that is imposed on a buyer based on the value of tangible personal property and services purchased or brought into the state from an unlicensed seller for use in the state.
The use tax is generally 4%. However, for persons who import goods for resale at retail in Hawaii, the rate is 0.5%
Counties are authorized to levy a surcharge on the state general excise tax and use tax to fund public transportation systems. The surcharge cannot be at a rate greater than one half percent (0.5%) of all gross proceeds and gross income subject to general excise and use tax.
General excise and use tax returns must be filed periodically as in any other state. However, in addition to the monthly, quarterly or semiannual returns, an annual reconciliation report is also required to be filed.
Stay tuned for more of Jeff's EYE ON series as he blogs about sales and use tax State by State.