What Taxes Do Small Businesses Pay in Hawaii?

Understanding your tax responsibilities is essential for staying compliant and making smart financial decisions. If you’re seeking reliable accounting services in Hawaii, it’s important to know which taxes your small business may be responsible for.

Hawaii has its own unique tax landscape—so whether you’re starting up or scaling your operation, being tax-savvy is part of running a successful US small business.

1. General Excise Tax (GET)

Hawaii doesn’t have a traditional sales tax. Instead, it imposes a General Excise Tax (GET) on nearly all business activity. Unlike sales tax, which is charged to the consumer, GET is based on your business’s gross income—not profit.

• The standard GET rate is 4% for most businesses.

• Wholesale, manufacturing, and certain other activities are taxed at a lower rate, typically 0.5%.

• Insurance commissions are taxed at 0.15%.

• Some counties impose a 0.5% surcharge on top of the 4% base rate.

All businesses must register for a GET license and file regular returns—monthly, quarterly, or annually—even if your business didn’t earn a profit.

2. State Income Taxes

Hawaii taxes business income differently based on your business structure:

• Sole proprietorships, partnerships, and S-corporations: Income passes through to the owners’ personal tax returns, subject to individual income tax rates ranging from 1.4% to 11%.

• C-corporations: Pay state corporate income tax directly. Tax rates vary, starting low for small corporations and increasing with income.

Hawaii provides an automatic six-month extension to file, but payments are still due by April 20 each year.

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3. Pass-Through Entity (PTE) Tax

Hawaii allows certain pass-through businesses, such as partnerships and S-corporations, to elect to pay income tax at the entity level. This can help reduce federal tax burdens by avoiding double taxation.

• The PTE tax is imposed at a flat 9% rate.

• Owners receive a proportional tax credit on their individual returns for the taxes paid by the entity.

This option is especially helpful for owners of pass-through businesses looking to manage their overall tax liability more efficiently.

4. Withholding Taxes

If your business has employees, you’re required to withhold Hawaii state income tax from wages and remit it to the state.

• Withholding rates range from 1.4% to 7.9%, depending on the employee’s income.

• Employers must file withholding tax returns quarterly.

This responsibility applies to all employers operating in Hawaii, regardless of the size of the business.

5. Other Taxes and Fees

Depending on your industry and location, your small business may also be responsible for:

• Environmental fees for industries that generate waste or emissions.

• Excise taxes on specific goods or services (e.g., fuel, alcohol).

• County or city-level business license fees or taxes, which vary by locality.

• Business registration fees, such as the one-time $50 fee for registering a limited liability company (LLC).

Important Reminders for Small Businesses

• Even if your business isn’t profitable, you must still file GET returns and meet other tax obligations.

• Hawaii’s Tax Online Portal provides tools for registering, filing, and making payments.

• The federal 20% Small Business Tax Deduction continues to benefit many Hawaii small businesses—but changes to federal tax law could affect this in the near future.

Summary

Taxes are a crucial part of managing a US small business, and Hawaii has some unique rules that require special attention. From GET and income taxes to employer obligations and local fees, knowing your responsibilities helps you avoid penalties and stay on track. If you’re looking into accounting services in Hawaii, understanding your tax landscape is the first smart step in keeping your business compliant and financially healthy.

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