Kauai does not have a sales tax. Hawaii instead imposes a General Excise Tax (GET) on the gross receipts of businesses, and on Kauai the combined rate is 4.5%: the 4% statewide rate under HRS Section 237-13 plus a 0.5% Kauai County surcharge authorized by HRS Section 237-8.6.1Justia. Hawaii Code 237-13 – Imposition of Tax2Department of Taxation. County Surcharge on General Excise and Use Tax If a business chooses to show the tax as a separate line on a customer’s bill, the maximum pass-on rate on Kauai is 4.712%. Charging more than that is a violation. The county surcharge is currently locked in through December 31, 2030.
Why the GET Is Not a Sales Tax
A mainland sales tax is charged once, at the register, on the final retail sale. The GET is different in two ways that matter for anyone doing business on Kauai.
First, it is a tax on the business, not on the customer. The business owes the tax on its gross income whether or not it passes anything on to the buyer. Some Kauai businesses absorb the GET into their prices and never show it separately; others itemize it. Either approach is legal so long as the pass-on stays at or below 4.712%.
Second, because the tax is on gross receipts, the tax collected from the customer is itself part of the business’s gross income. That is where the 4.712% figure comes from: it accounts for the “tax on the tax” that results when the GET is passed through.2Department of Taxation. County Surcharge on General Excise and Use Tax
What the 4.5% Applies To
The GET reaches almost every kind of business income earned on Kauai. Retail sales of goods are taxed at 4.5%, but so are services, contracting, entertainment, commissions, and rental income.3Department of Taxation. General Excise Tax (GET) Information Professional fees charged by doctors, lawyers, accountants, and consultants are taxable at the full rate — a difference that catches people used to states where services are exempt.1Justia. Hawaii Code 237-13 – Imposition of Tax
Rent counts too. Whether you lease a long-term rental to a Kauai family or a vacation cottage by the week, the 4.5% applies to every dollar of gross rental receipts.
The Wholesale Rate
When a wholesaler, manufacturer, or producer sells to another business for resale rather than to a consumer, the rate drops to 0.5% statewide, and the county surcharge does not apply.4State of Hawaii, Department of Taxation. General Excise Tax The lower rate exists so the tax does not compound each time goods change hands before reaching a final buyer. To qualify, the seller needs a resale certificate from the buyer. Without one, the sale is presumed retail and taxed at 4%.1Justia. Hawaii Code 237-13 – Imposition of Tax
Income Outside the GET
Some income is not subject to the tax at all. Wages and salaries earned as an employee are outside the GET. So are insurance proceeds, compensatory damages, gifts, and inheritances.5Justia. Hawaii Code 237-24 – Amounts Not Taxable Businesses can also deduct sales to the federal government and credit unions, out-of-state sales delivered outside Hawaii, food purchased with SNAP or WIC benefits, and amounts a general contractor pays to a licensed subcontractor.6Hawaii Department of Taxation. An Introduction to the General Excise Tax These deductions are claimed on your periodic GET return, not on separate forms.
Short-Term Rentals: The Extra Tax Layer
If you rent to guests for stays under 180 consecutive days, the 4.5% GET is not the whole picture. Hawaii’s Transient Accommodations Tax (TAT) applies at a statewide rate of 10.25% under HRS Chapter 237D.7Hawaii Department of Taxation. Chapter 237D – Transient Accommodations Tax Kauai County adds its own 3% TAT surcharge on top of that.8County of Kauai. Transient Accommodations Tax
Stack the state TAT, the county TAT, and the GET with its surcharge, and a Kauai short-term rental operator faces a combined tax burden approaching 18% of gross rental income. That number needs to be built into nightly rates from the start. Short-term rentals also require a separate TAT registration through the BB-1 application, with a license fee of $5 for properties with one to five units or $15 for six or more.9Hawaii Department of Taxation. Form BB-1, State of Hawaii Basic Business Application
Selling Into Kauai From Off-Island
You do not need a physical presence on Kauai to owe GET. Following the Wayfair decision, Hawaii adopted economic nexus rules. A remote seller must register for a GET license once it has $100,000 or more in gross income from Hawaii sources, or 200 or more separate transactions with Hawaii buyers, in the current or prior calendar year.10Hawaii Department of Taxation. Tax Information Release No. 2020-05
Marketplace platforms carry their own obligations. Hawaii treats a marketplace facilitator such as Amazon or Etsy as the retail seller for products moved through its site, and the facilitator collects and remits the 4% GET plus any county surcharge on those sales. For the individual seller, sales made through a marketplace facilitator are treated as wholesale and taxed at 0.5%.11Hawaii Department of Taxation. Tax Information Release No. 2019-03 Sales you make through your own website, at a craft fair, or through any channel outside a marketplace are still taxed at the full retail rate.
Registering and Filing
You need a GET license before your first taxable transaction on Kauai. Registration is done through Form BB-1, the State of Hawaii Basic Business Application, with a one-time $20 license fee.12Department of Taxation. General Excise and Use Tax9Hawaii Department of Taxation. Form BB-1, State of Hawaii Basic Business Application Operating without a license can bring fines and a court order shutting down the business until it comes into compliance.
Periodic returns go on Form G-45, filed through Hawaii Tax Online. Filing and paying by debit through the portal is free.13Department of Taxation. E-Services Information Filing frequency is set by annual GET liability:
- More than $4,000 per year: monthly.
- $4,000 or less per year: quarterly.
- $2,000 or less per year: semi-annually.
Each periodic return breaks taxable income down by activity type (retail, wholesale, services, rentals) and assigns tax to each county where the business operates.14Hawaii Department of Taxation. General Excise/Use Tax Returns General Instructions The Kauai address on your license is what ties the 0.5% surcharge to your activity, and skipping the county assignment can trigger a 10% penalty on its own.
After the tax year closes, Form G-49, the annual return and reconciliation, totals actual activity against what you already paid on the G-45s. Underpayments are settled with the G-49; overpayments can be refunded or credited forward.15State of Hawaii — Department of Taxation. General Excise/Use Annual Return and Reconciliation
What Late Filing Costs
The late filing penalty is 5% of the unpaid tax per month or partial month the return is overdue, capped at 25%. Filing on time but failing to pay in full within 60 days of the due date brings a separate penalty of up to 20% on the unpaid balance. Negligent underpayment can be penalized at up to 25% of the shortfall, and fraud at 50%. Interest runs at two-thirds of one percent per month on any unpaid tax until the balance clears.16Justia. Hawaii Code 231-39 – Additions to Taxes For a business with steady monthly volume, these charges compound quickly.