Thu 26 Nov 2015 | By:

Hawaii Business Taxes: Everything You Need to Know

Small Business Taxes

When incorporating business in Hawaii, awareness of Hawaii business taxes is important as they are part of your obligation as a business owner. It is through the compliance of these requirements that you will be able to have smooth-running operations.

As there are a number of Hawaii business taxes imposed by the state, it should be your responsibility as a business owner to sort through all these and comply with the necessary paperwork. Remember, failure to meet these will result in different penalties, ranging from fines to business closure.

This guide will provide you with the information you need meet those obligations. Note that each tax situation is different, what may apply to one business structure may not be applicable in your case, so always take this in consideration when complying your requirements.


1) Hawaii Business Income Tax

In Hawaii, the type of business structure you have will influence whether you will be charged with a business income tax or not. However, a franchise tax is not imposed by the state. The same thing goes for the privilege tax, which is the tax you pay for the privilege of operating a business within a specific state.

For Corporations, a business income tax is imposed. For S Corporations, LLCs, and Partnerships, you will be taxed at an individual rate. Usually, the rate for business income tax is estimated at 4.4% up to 6.4%.


2) Hawaii Federal Tax Forms

Since there are multiple requirements to be completed, getting confused on which forms to use, what taxes to pay for, and what necessary paperwork are a common enough occurrence. To avoid this, you can directly visit Hawaii’s Department of Taxation website to find all your federal tax forms and publications required to complete your obligations.

From tax forms, online filings and payments, income tax refund status, and tax licenses as well. If there is specific information related to taxes you’re looking for, you can search for it in their information database.


3) Unemployment Insurance and Tax Forms

Another requirement to operate a business legally in the state of Hawaii is to comply with the Hawaii Unemployment Insurance Tax. Employees who have no work through no fault of their own can claim this benefit. That said, as a new entrepreneur starting a business in Hawaii, you are required to pay for this tax.


4) Hawaii Sales and Use Tax

In lieu of the sales tax in Hawaii, a general excise tax is collected. On top of your business’ state income tax, the general excise tax is collected for most businesses in the state. A 4% rate is charged for excise tax. Basically any business that derives income in the state whether through sales of goods or rendering services is required to pay this tax.

Where there is a general excise tax, there is always a use tax that supplements it. A use tax should be paid when upon purchase of an item that does not have your state’s general excise tax and you plan to dispose of, store, or use this in the state. As a business, you are required to pay for both the general excise tax and the use tax.


a Tool to Make Your Tax Life Easier

Startup Tools and ResourcesThere is plenty of paperwork to be completed when processing for your requirements on Hawaii business taxes. Reports have to be put in order, books have to be updated, and incomes and expenses have to be sorted out.

Rather than getting overwhelmed, it’s a good idea to look into a small business accounting software to keep your finances under control. This way when tax time rolls around, you’ll be ready.

Best Small Business Accounting Software

QuickBooksFreshBooks, and Xero are just a few of the industry-known accounting software tools for small businesses. Each of these tools can help sort out your books, so you can readily submit reports and paperwork required by the state when complying with Hawaii business taxes.

Please understand that this guide on business taxes exists to provide information. It is not a legal article nor advice. Any questions on the details of Hawaii business taxes should be directed to your accountant.

About Liesha Petrovich

Liesha is a small business owner of 20 years, host of Startup Savant, the owner of a karate dojo in Maine, and creator of Work Mobly. During free time she's with her family and working on a Doctorate in Entrepreneurship.