Questions about Hawaii GE Tax (General Excise Tax)? Here are some quick answers to the most commonly asked questions.
Warning: Every tax situation is different and you may need more forms that are presented here. This is an introductory guide only, and we recommend having your tax forms filed by a professional. Information presented on this page may be out-dated. Please read all Hawaii State-provided form instructions carefully.
Hawaii GE Tax Question #1 – Do I Have to Pay GE Tax?
If you are asking, then the answer is probably yes.
Small business income, independent contractor income, income from self employment, retail income, services income, commissions, rental payments received, and many more types of income are all are subject to the excise tax.
There are many (but somewhat rare) exemptions to Hawaii GE tax such as for financial institutions, alcohol fuels, ship building, refineries, insurance companies, contractors that clean up hazardous waste, etc.
If you think you have gross income might be exempt from Hawaii GE Tax, you can look at the Hawaii DOT website to view the exemption list.
Please note that these exemptions are somewhat uncommon, and if you qualify for an exemption, you are still required to file the GE Tax returns along with an additional schedule to claim the exemption.
Hawaii GE Tax Question #2 – How do I Get a GE Tax License?
You apply by filling out GE Tax Form BB-1. Make sure you seek out the most updated form, as Hawaii has revised the form recently, and there are some links leading to Hawaii Government Web Pages that are out of date.
As of 2017, the license costs $20.
You can also apply online by going to the Hawaii Business Registration Wizard.
For liability, legal and ethical reasons, we can’t help you or answer your questions about Form BB1. Please refer to the instructions. If you need help, you can hire us to review your situation, prepare, and file the form for you. Contact Us Here.
Hawaii GE Tax Question #3 – Can I Write Off My GE Taxes Paid on my Federal Taxes?
In most cases, for the most part, you can write off your GE Tax expenses. Please keep in mind that every situation is different and there are some exceptions.
Hawaii General Excise Taxes can often be deducted on federal schedules E (for rental income) and C (for sole proprietorship income). If you have a multi-member partnership or corporation, GE Tax can often be written off on the appropriate income tax forms.
There is a little bit of a “trap” for calendar year taxpayers (most taxpayers and businesses file on the calendar year). In most cases, you have to be sure to take the deduction in the year that you actually “paid” your tax bill – not the year for which you “owed” the tax. Please consult with a tax professional for the proper way to take this write off.
Hawaii GE Tax Question #4 – How Often do I Have to Pay?
- If you pay more than $4,000 total in Hawaii GE Tax during the year, you are required to file Form G-45 on monthly basis.
- If you pay less than $4,000 in GE Taxes during the year you file Form G-45 on a quarterly basis.
- If you pay less than $2,000 in GE Taxes during the year you file form G-45 semi-annually.
When you sign up, you should pick a frequency appropriate to how much tax you plan to have to pay. If you select a filing schedule that is too infrequent, the Hawaii Department of Taxation will likely change your GE Tax account (and send you a letter to let you know that they did it).
Hawaii GE Tax Question #5 – I Didn’t Make a Profit – Do I Still Have to Pay?
Yes (sorry). Think of GE Tax as if it were a sales tax.
Hawaii General Excise Tax is based on “gross” income, not “net income”. This means that all rents received are subject to the tax – even if you operated your rental unit at a loss. The same goes for business.
If you had $50,000 in sales and $40,000 in expenses, you pay GE Tax on $50,000.
Note that this is generally not true for “income tax” – but “GE Tax” is totally separate and the tax is imposed differently.
Hawaii GE Tax Question #6 – How Much Can I Charge My Customers?
You are allowed to pass the tax on to your customers, but if you only add the tax rate amounts then you are not quite collecting enough tax to cover the taxes due. This is because the tax is calculated on the total amount you collect, including the extra for the tax. It’s a bit complicated.
The simple answer is that many businesses can add 4.712% to each sale on Oahu, Kauai, and the Big Island, and 4.1666 on Maui.
This is very general, however. For more detail on passing along Hawaii GE Tax to your customers, click here.
Hawaii GE Tax Question #7 – What if I Haven’t Been Paying?
If you do not file and pay your GE Tax you can be subject to penalty and other unpleasant enforcement actions. If you have been renting property or running a small business and not paying the tax, it’s probably a good idea to fill out an application for a license, report your income, and pay GE Tax. There are many ways that Hawaii will find out that you are renting or in business and it is likely that at some point they will catch up with you.
Hawaii also has a tracking system that looks at what you filed on your income tax return. If you have years of self employment or rental income on your regular tax returns, it is very likely that you will get an examination letter from the State of Hawaii at some point.
Even if you can’t pay, the collections department will work with you on a payment plan. Though it is unpleasant to think that you might owe hundreds or thousands in back taxes, it’s generally not the end of the world and not worth losing too much sleep over. So we suggest that you file and face the inevitable.
Coming forward voluntarily gives you MUCH more negotiating leverage rather than waiting until they come after you. With the state facing heavy rail expenses and a depleted budget, this is an area that they have been going after vehemently and it is very likely that they will catch up to you.
Hawaii GE Tax Question #8 – Should I Hire Someone to prepare My GE Tax Returns?
In many cases, the forms are not that difficult to prepare, but we officially recommend having a tax professional prepare your GE Tax forms. If you wish to file yourself, instructions can be found here.
In the past, we used to tell clients, “It’s easy. If you are cost sensitive, just file the forms yourself and save on the fees”. This honest policy didn’t work out for us. Many of these clients who filed by themselves made mistakes with the filings. In some cases this resulted in penalties, interest, and it created conditions to where several back-and-forth responses to the Hawaii Department of Taxation were needed to deal with the errors. Some of these were messy and took months to resolve. Clients blamed us for telling them “how easy it was” and demanded our time and help with these issues. This is why we no longer recommend that taxpayers prepare and file their own GE Tax forms.
Please understand that, for legal and several other reasons, we can not “teach” or “provide advice” of any kind for GE tax filing. If you wish to file yourself, please carefully read the Hawaii Department of Taxation’s General Excise Tax Instructions.
One thing to note is that preparation services are typically less than late fees, so if there is a chance that you might not meet your GE Tax Return obligations on time on your own, then you should certainly hire us (or another service provider) to file your forms on time for you.
Hawaii GE Tax Question #9 – What If I’m no Longer in Business?
If you are no longer collecting revenue subject to the tax you are supposed to cancel you active license status. This prevents you from having to file GE Tax Forms with nothing but zeros on them (this is technically required until you cancel).
To cancel your GE Tax license, fill out a Notification of Cancellation of Tax Licenses and Tax Permits. It is a very simple form to fill out. Go to this page and select the GEW-TA-RV-1 form.
Hawaii GE Tax Question #10 – Do I Need Form G-45 periodically AND Form G-49 at the End of Each Year too?
Yes. You have to fill out form G-49 in addition to any required form G-45. For example, if you pay semi-annually and you are a calendar year taxpayer, you fill out one Form G-45 for the first half of the year (due on July 20th, one Form G-45 for the second half of the year (due the following January 20th, and one G-49 return to reconcile the entire year (due 4 months after the end of the fiscal year.).
- Do I Have to Pay Hawaii GE Tax on my Property Rental?
- Passing Along Hawaii GE Tax to Your Customers
- Hawaii GE Tax – The 10 Most Frequently Asked Questions
- How Often Do I File My Hawaii General Excise Tax Forms?
- Simple Guide to Hawaii GET (General Excise Tax) Forms
- If you received a letter saying that you owe Hawaii General Excise Tax or Transient Accommodations Tax, click here.
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Please note that we can’t give tax advice in the comments section.
To help you with your GE Tax questions, we would have to go over and understanding the entire situation, setting up a client/accountant agreement, and disclosing our privacy policies.
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