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Sales Tax in Hawaii

There are several types of taxes a citizen of America pays. However, some taxes are for individuals while others are for organizations. In addition, the collection method and rate vary from one tax to another. Sales tax is an example of a tax paid when products and services are purchased. This levy is usually collected by retailers from buyers. Similarly, the tax rate varies from one state to another. In Hawaii State, the Department of Taxation is responsible for tax collection. Also, each local government within the state has its tax rate.

Hawaiian Sales Tax

In the State of Hawaii, the tax rate stands at 4%. Yet, there is an additional levy that comes from the local authorities. This local tax can get up to 0.5%, which translates to 4.5%. Likewise, the average state tax stands at 4.44%.

Taxable Items and Services in Hawaii

Sales tax is collected on various goods and services. The services that are eligible for such tax collection include:

  • Construction services;
  • Lawyer fees;
  • Other building service costs.

In addition, almost all tangible goods are eligible for collection of sales tax. However, there are some exemptions. The items eligible for sales tax exemption include prescription drugs and medical devices. Unlike some states, Hawaii requires the collection of sales tax on shipping costs. As a result, sales tax on shipping costs must be paid for items that are eligible for sales tax. However, if you ship taxable and exempted items together, you will pay sales tax for the whole shipment.

Sales Tax on Digital Items

All products and services that can be accessed via the internet are referred to as digital items. Such products include eBooks, digital music, images, video, and more. However, there are some inconsistencies relating to software service products. Therefore, some applications may be taxed while others may be exempted.

Paying Sales Tax in Hawaii

Before an entity can collect sales tax, it must register with the state tax system. A business that collects sales tax without getting a permit is performing an illegal act. Hence, getting a tax permit through registration is essential. You can get more information on how to complete the registration from the Hawaiian revenue website. Once there, you will have to provide the following details to complete your registrations.

  • Information about the person of contact in a business
  • Contact information about the business
  • Employer Identification Number or Social Security Number, where applicable
  • Bank details that include account number
  • Business registration type.

Once registered, you can begin to retrieve sales taxes from your buyers.

Collecting Sales Tax

Registering your business with the Hawaiian Tax Authority is the easy part. Therefore, the process of collecting the levy is the challenging part. The destination-based nature of the Hawaiian tax system is the reason for this difficulty. The challenge you may face depends on the business and customer locations. In addition, the difference in jurisdictional sales taxes adds another layer of complexity. Also, the tax authority of this state has more specific requirements for online businesses.

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