Hawaii General Excise Tax: What Every Business Owner Actually Needs to Know

If you've been running a business in Hawaii for any length of time, you've heard of the General Excise Tax. You probably have a GET license. You've likely been filing returns. But here's the thing — most business owners who've been doing this for years are still working off a few fundamental misunderstandings that are quietly costing them money.

It starts with what GET actually is.

GET Is Not a Sales Tax — And That Matters More Than You Think

Hawaii is one of only two states in the country that doesn't have a statewide sales tax. Instead, Hawaii uses the General Excise Tax — and while it shows up on invoices in a similar way, the mechanics are completely different.

A sales tax is the customer's burden. The business collects it on behalf of the state and passes it along. If a customer doesn't pay, the business isn't on the hook for the tax.

The GET doesn't work that way. The GET is a tax on you — on the privilege of doing business in Hawaii. It's assessed on your gross income from business activity, and you owe it whether or not you collect it from your customers. The customer relationship is secondary. Your obligation to the state is not.

That one distinction changes how you need to think about pricing, invoicing, and financial planning.

Who It Applies To

The GET casts a wide net. If you're generating revenue in Hawaii, you're almost certainly subject to it. That includes:

• Contractors and tradespeople (construction, plumbing, electrical, HVAC)

• Medical and healthcare providers

• Consultants, agencies, and professional service firms

• Independent contractors and freelancers

• Landlords collecting rent

• Virtually any other business activity in the state

There are narrow exemptions — certain medical services, some wholesale transactions, a handful of others — but they're the exception, not the rule. The default assumption should always be that your revenue is subject to GET until you've confirmed otherwise.

The Rate Structure (And Where Most People Get It Wrong)

The base GET rate is 4%. But all four counties in Hawaii — Oahu, Maui, Kauai, and the Big Island — have adopted a 0.5% county surcharge. As of 2024, when Maui added theirs, every county in the state is now at the same combined rate of 4.5%.

So far, so good. Here's where the confusion starts.

If you're passing GET on to your customers, the correct rate to charge isn't 4.5%. It's 4.7120%.

The reason for the gap: GET is calculated on the total amount you collect, including the GET itself. That means if you simply add 4.5% to your invoice, the GET portion of what you collected is also technically taxable — and you end up slightly short. The 4.7120% pass-on rate accounts for that. Most business owners don't know this, which means they've been quietly under collecting on every invoice.

Passing It On vs. Absorbing It

You're not required by law to charge your customers GET. But if you don't, it comes out of your margin — you still owe the state regardless. Most businesses choose to pass it on, which is the right call financially.

If you do pass it on, there are rules. It must be disclosed to the customer, listed as a separate line item on the invoice, and calculated at the correct rate. One thing worth noting: calling it "sales tax" on your invoice is technically incorrect. Hawaii doesn't have a sales tax. It's GET, and that's what it should say.

Gross Income, Not Net — This Is the One That Catches People Off Guard

This is the most important concept to internalize as a Hawaii business owner, especially if you're used to thinking in income tax terms.

GET is calculated on your gross income — your total revenue before any business expenses are deducted. You cannot subtract your overhead, your materials, your payroll, or any other operating cost before calculating what you owe.

If your business brought in $600,000 last year and had $480,000 in expenses, you owe GET on $600,000. Income tax might only look at your $120,000 in profit — GET doesn't care about profit. This is a completely separate calculation.

The Credit Card Fee Trap

Here's a more specific version of the same principle that trips up a lot of business owners.

When you accept credit card payments, your processor takes 2–3% before the money ever hits your account. A lot of business owners — often without realizing it — calculate their GET on the amount they actually deposited rather than the amount they invoiced.

That's incorrect. GET is owed on your gross invoiced amount. The processing fee is your cost of doing business, not a deduction against your taxable activity. Calculating on net deposits means you're consistently underpaying the state — a small gap per transaction that compounds into a real liability over the course of a year.

Filing Schedules and Deadlines

How often you file depends on your estimated GET liability. The state assigns you a filing frequency — monthly, quarterly, or annual — and returns are due by the 20th of the month following the close of your filing period.

The right filing frequency matters more than most people give it credit for. We'll cover this in detail in an upcoming post, but the short version is: filing on the wrong schedule — or defaulting to annual when your liability qualifies you for more frequent filing — creates both compliance risk and cash flow problems.

What Happens When You Get It Wrong

The penalty for failing to file on time is 5% of the unpaid tax per month, up to a maximum of 25%. Interest accrues on top of that from the first day after the due date.

Late filing and underpayment are treated separately — meaning you can be penalized for both. If you've been calculating GET on net deposits for the past three years, the gap may be larger than you expect once penalties and interest are factored in.

GET in Your Books Is a Liability, Not Income

If you're collecting GET from customers and that money is sitting in your operating account mixed in with revenue, your financial picture is distorted. GET you've collected belongs to the state — it was never yours. Recording it as revenue inflates your top-line numbers, makes your business look more profitable than it is, and means every financial decision you make is based on numbers that aren't accurate.

Properly structured books keep GET collected in a separate liability account. It clears when you remit to the state. What's left is your actual revenue. We'll go deeper on the bookkeeping side in a separate post — but this is the principle: clean GET accounting is the foundation of clean financials.

What to Do Next

Most business owners file their GET returns, pay what they calculate, and move on — assuming they've got it handled. But the gaps we see most often aren't dramatic errors. They're small, consistent miscalculations that have been compounding quietly for years.

If you're not completely confident in how you're calculating, recording, and filing your GET — or if anything in this post gave you pause — it's worth a closer look.