Operating a successful business generates revenues for you, the owner, which, in turn, requires the submission of several financial documents (primarily in the areas of business registration and taxes) with appropriate State agencies. This lesson gives an overview of the required financial filings you have to address to ensure that your business is in compliance with State laws and regulations.
Why is this important?
If you generate income, own property, buy or sell goods, or hire employees, most likely you will have to pay taxes. There are several taxes associated with running a business, which are described in the following section.
To ensure that you pay the appropriate amount of taxes and avoid any penalties or liens, it is essential that you keep accurate records (this is described in greater detail in the “Basic Bookkeeping” lesson of this Guidebook).
Types of business-related taxes
Common taxes that you have to file as a new business include:
State Income Tax – Depending on the business structure of your company, you have to file taxes with the State government on either an individual or corporate basis.
Individual income tax rates vary from 2% for the first $1,500 to a maximum 10% for taxable income over $20,500. Capital gains are taxed at a maximum 7.25%.
Reports and taxes are due on the 20th day of fourth month after close of the taxable year. Withholding returns are due on or before the 15th day of the following month. Employers with tax liabilities exceeding $100,000 a year, must file on or before the 10th day of the following month. Estimates of income are due on the 20th of April, June, September and January.
The net income of corporations is taxed at a rate of 4.4% if taxable income is not over $25,000; 5.4% if over $25,000 but not over $100,000; and 6.4% on all taxable income over $100,000. The tax imposed on capital gains is 4%. Deductions, in general, conform to the Internal Revenue Code.
Reports and taxes are due on the 20th day of the fourth month after the end of the taxable year. Income estimates are due on the 20th of September and January.
General Excise Tax – General Excise Tax (or GET) is a tax levied on gross income (i.e., total business income before any business expenses are deducted) derived from business activity in Hawaiʻi.
GET is calculated on gross income, gross receipts or gross proceeds of all business activities: 0.5% on wholesaling, intermediary services, manufacturing, producing, canning, and activities of businesses operated by blind, deaf or totally disable persons; 0.15% on insurance solicitors; 4% on retail sales of goods, services, and other activities. Exemptions are allowed for goods manufactured for export and certain services and a refundable tax credit for GET paid on depreciable tangible personal property is available.
Reports and taxes are due monthly by the end of following month. You may elect to file quarterly or semi-annually under certain conditions. An annual summary and reconciliation return is due on the 20th day of the fourth month following the tax year.
Use Tax – Use Tax is a tax on tangible personal property imported or purchased without payment of the GET. Rates are 0.5% on goods imported for resale at retail; 4% on all other imports. There is a refundable income tax credit for Use Tax paid on depreciable tangible personal property.
The Use Tax was enacted to reduce the price advantage that untaxed out-of-state sellers of goods, services, and contracting have over Hawaiʻi sellers. Because of the complementary nature of these taxes, businesses are automatically registered for the Use Tax when they register for the General Excise Tax, and report both taxes on combined General Excise/Use Tax returns.
Real Property Tax – Real Property Tax is that assessed on real property, land and improvements. Assessments are taxed at 100% of “fair market value.” Maximum exemption for owner-occupied homes is $40,000, with multiple exemptions allowed for those over 55. There are various rates for land, improvements, and classes of property. Fiscal year 2018 agricultural rates per $1,000 net taxable value were: Hawaiʻi, $9.35; Honolulu, $5.70; Kauai, $6.75; Maui, $6.01.
Taxes are paid in semi-annual payments. In Honolulu, assessment notices to taxpayers are sent by December 15; any appeals by the taxpayer must be filed by January 9; the tax base is certified by February 1; and May 30 is the last day to amend rates. All other counties: assessment notices to taxpayer by March 15; appeals filed by April 9; tax base certified by April 19; June 20 last day to amend rates.
Motor Vehicle Weight Tax – On vehicle weights are as follows:
- Hawaiʻi, commercial vehicles: 1 cent per pound; passenger vehicles: 0.5 to 1.0 cent per pound; $6 minimum on motor vehicles.
- Honolulu, commercial vehicles: 2 cents per pound; passenger vehicles: 1.25 cents per pound; $12 minimum on motor vehicles
- Kauai, commercial vehicles: 2 cents per pound; passenger vehicles: 0.75 cent per pound; $12 minimum.
- Maui, commercial vehicles: 1.5 cents per pound; passenger vehicles: 0.75 cent per pound; $6 minimum on motor vehicles.
- In addition to county taxes, state tax of: 0.75 cents per pound to 1.25 cents per pound; $3 minimum. Flat rate of $150 for vehicles weighing more than 10,000 pounds.
Fees are paid annually upon vehicle registration renewal.
Additional financial filings
Registering your business – In Hawaiʻi, corporations, partnerships, limited liability companies, and limited liability partnerships must be registered with the Department of Commerce and Consumer Affairs (DCCA), Business Registration Division and are required to file an annual report.
For more information on registration and to obtain required forms, visit the DCCA website at http://hawaii.gov/dcca.
Unemployment Insurance – An individual or organization, which has or plans to employ one or more workers performing services must register with the Unemployment Insurance (UI) Division within twenty (20) days after services in employment are first performed. A family-owned corporation which has two family members, related by blood or marriage, who, as the only employees each own at least 50% of the shares issued by the corporation may apply for exclusion from UI coverage. To elect this exclusion option, Form UC-336, “Election by Family-Owned Corporation to be Excluded From Coverage
Under Section 383-7(20),” can be obtained at http://www.hawaii.gov/labor/ui or from the nearest UI office.
Employers must complete Form UC-B6, “Employer’s Quarterly Wage, Contribution and Employment and Training Assessment Report,” and pay all contributions and assessments by the end of the month after the end of the calendar quarter. Completed reports and payments should be mailed to State Tax Collector, PO Box 3223, Honolulu, HI 96801-3223. Employers preferring to file reports and make payments online can download the free Quarterly Wage Reporting System (QWRS) software program to prepare reports, compute taxes and transmit reports and payment. Go to: https://hui.ehawaii.gov to download the QWRS software and create an account to obtain a username and password.
Workers’ Compensation Insurance – In Hawaiʻi, employers having one or more employees (other than those excluded from this requirement), full-time or part-time, permanent or temporary, are required to provide Workers’ Compensation (WC) coverage for their employees. Employers may provide WC coverage by purchasing insurance from an authorized carrier or becoming a self-insured employer who pays statutory benefits directly to its employees (must be approved by the Dept. of Labor and Industrial Relations). Additional information and required forms can be located on the DLIR Disability Compensation Division website at http://hawaii.gov/labor/dcd.
Temporary Disability Insurance – In Hawaiʻi, employers are required to provide Temporary Disability Insurance (TDI), or sick leave benefits, when their eligible employees are unable to work because of a nonwork-related illness or injury. The employer may pay for the entire cost or share the cost with the employees eligible for coverage, in which case the employer may deduct one-half the premium cost but not more than 0.5% of the employees’ weekly wages up to a maximum of $4.21 per week for 2008, which is set annually by the Disability Compensation Division. The employer may select from several options to provide TDI, which are described in detail on its website at http://hawaii.gov/labor/dcd where you can find additional information and required forms.
Next steps and resources
- Tax rates and due dates should be confirmed with the appropriate state and county agencies to ensure that you are in compliance with the most recent regulations or you should consult a tax professional for assistance. Additional information can be found in the State of Hawaiʻi, Dept. of Taxation’s Tax Facts for agricultural producers which can be found online at http://hawaii.gov/tax/taxfacts/tf01-02.htm
- The Business Action Center can assist you with obtaining your GET license, Unemployment Insurance tax registration, business and trade name registrations and Federal Employer’s Identification Number (FEIN). They also provide comprehensive information on licensing requirements for the state, county and federal governments as well as information on business assistance, counseling, workshops offered by other agencies, and alternative financing programs
Business Action Center
1130 North Nimitz Highway
Second Level, Suite A-220
Honolulu, Hawai`i 96817
Phone: (808) 586-2545
http://hawaii.gov/dcca/areas/bac/
Open: 7:45 am – 4:30 pm
Monday thru Friday
Neighbor Islands toll free:
Hawai`i – 974-4000, ext.6-2545
Kauai – 274-3141, ext. 6-2545
Maui – 984-2400, ext. 6-2545
Molokai/Lanai – 1-800-468-4644, ext. 6-2545
- The following resources provide information and forms for starting a business in the State of Hawaii. Many services are available online.
Department of Commerce and Consumer Affairs Business Registration Division
Mailing Address
P.O. Box 40
Honolulu, Hawaii 96810
Office Location
King Kalakaua Building
335 Merchant Street, Rm. 201
Honolulu, Hawaii 96813
http://hawaii.gov/dcca/areas/breg/
Open: 7:45 am – 4:30 pm
Monday thru Friday
Phone:
(808) 586-2744 (administration)
(808) 586-2727 (documents registration)
Hawaii Business Express
An online registration service provided by the state that covers all the forms required for business registration with all the state agencies and partners. It provides easy to read instructions and context sensitive help.
http://hbe.ehawaii.gov/BizEx/home.eb