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Do PEOs Handle General Excise Tax for Hawaii Businesses?

Understanding how the General Excise Tax (GET) applies to Hawaii small businesses is essential—especially if you’re working with a Professional Employer Organization (PEO). While PEOs can take on certain HR and payroll functions, they don’t typically manage GET compliance. That’s where having the right accounting services in Hawaii becomes critical.

In this blog, we’ll break down what GET covers, what PEOs handle (and what they don’t), and how accountants help fill in the gaps to keep your business fully compliant.

Understanding Hawaii’s General Excise Tax (GET)

Hawaii’s GET isn’t like the sales tax used in most other states. Instead, it’s a tax on your business’s gross income, meaning the total revenue you earn before deducting expenses. It applies to a wide range of business activities, including:

  • Retail sales

  • Services

  • Commissions

  • Contracting

  • Leasing and rentals

Key points:

  • Base GET rate: 4%

  • County surcharges: Up to 0.5% in some areas (e.g., Honolulu), bringing the total to 4.5%

  • Responsibility: GET is filed and paid by the business—not the PEO

For any Hawaii small business, understanding and complying with GET requirements is a must.

Let our tax experts handle your sales tax. From registration to filing, we’ve got your compliance covered. See how we help here.

What PEOs Do for Hawaii Businesses

PEOs for Hawaii businesses are often used to manage HR functions and employee-related administration. Typically, a PEO helps with:

  • Payroll processing

  • Payroll tax withholding and remittance

  • Employee benefits administration

  • HR compliance and employment documentation

This support is valuable, especially as regulations become more complex. However, GET compliance is not usually included in a PEO’s responsibilities.

GET Responsibilities When Working With a PEO

1. The Business Is Still Responsible for GET

Even when a PEO manages payroll and HR functions, the legal responsibility for filing and paying GET remains with your business. The state views GET as a tax on gross receipts earned by the business entity, not the co-employer.

2. PEOs May Claim Limited Exemptions—If Registered

Some PEOs register with the Hawaii Department of Labor and Industrial Relations (DLIR), which allows them to claim exemptions on certain pass-through costs, such as:

  • Wages paid to your employees

  • Payroll taxes

  • Insurance premiums

  • Employee benefits

However:

  • The PEO must be properly registered with the DLIR

  • They are still subject to GET on their own service fees

  • If unregistered or noncompliant, GET may be assessed on the full amount billed, including wages

3. GET May Be Passed Through to Clients

Many PEOs choose to “pass on” their GET liability by including it as a separate charge on client invoices. This practice is legal, but:

  • It’s not required by law

  • The amount must reflect actual GET owed, not a markup

  • It’s worth asking your PEO how they handle this

Why Hawaii Businesses Still Need Accounting Services

Even with a PEO, accounting services remain essential for Hawaii small businesses—especially when it comes to staying compliant with GET. Your accountant plays a very different role from your PEO.

Here’s where accounting services step in:

  • Track income subject to GET

  • Prepare and file GET returns (monthly, quarterly, or semiannually)

  • Review and clarify PEO invoices for GET exposure

  • Ensure proper handling of exemptions

  • Help you avoid common filing mistakes or overpayments

In short: PEOs manage your employees. Accountants help manage your financial and tax obligations. You need both for full coverage.

Summary

While PEOs for Hawaii businesses offer valuable HR and payroll support, they do not file or pay General Excise Tax (GET) on behalf of your business. GET remains the responsibility of the business entity and must be handled separately. If you’re working with a PEO, it’s important to confirm whether they’re registered with the DLIR, understand which fees are taxable, and ensure your GET filings are accurate and timely. Partnering with an accountant who understands Hawaii’s tax system gives your business the support it needs to stay compliant and avoid surprises.

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