Understanding the Excise Tax in Hawaii: What You Need to Know
If you own a business in Hawaii, it’s important to understand the implications of the excise tax. In this article, we’ll discuss what excise tax is, how it works in Hawaii, and what you need to know to comply with the law.
What Is Excise Tax?
Excise tax, also known as a sales tax, is a tax imposed on certain goods or services. It is usually imposed on the seller of the goods or services, but ultimately passed on to the consumer in the form of a higher price.
In Hawaii, the excise tax is a general tax that applies to all business activities. It is imposed on the gross income of a business, which means the total amount of revenue received from all sources, including sales, services, leases, and rentals.
How Does Excise Tax Work in Hawaii?
The excise tax rate in Hawaii is 4%. This means that for every $100 of gross income, the business must pay $4 in taxes.
However, certain industries have different tax rates. For example, the tax rate for retail sales of tangible personal property is 0.5%, while the tax rate for wholesale sales is 0.15%.
In addition, certain transactions are exempt from excise tax. For instance, sales of food for consumption off premises are exempt, as are sales of prescription drugs and medical devices, among others.
What You Need to Know to Comply with the Law
To comply with Hawaii’s excise tax law, businesses must register for a state tax ID number and file regular tax returns. The frequency of the tax returns depends on the amount of tax liability. For example, businesses with an annual tax liability of less than $4,000 file returns quarterly, while those with a liability of $4,000 or more file monthly.
It’s important to keep accurate records of all business activities that generate gross income. Business owners should also be familiar with all applicable exemptions and tax rates, and keep up to date with any changes in the law.
Summary
Understanding the excise tax in Hawaii is essential for any business owner. By understanding what excise tax is, how it works in Hawaii, and what you need to know to comply with the law, you can avoid penalties and ensure that your business operates smoothly. Be sure to register for a tax ID number, keep accurate records, and stay up to date with changes in the law to stay compliant.
