How to Register for a Sales Tax Permit in Hawaii

How often have you spent long hours at the office, even after every other coworker has left the building, to finish work before a deadline? How often have you been swamped with tasks your superiors have started and had no intention or plans on finishing themselves? Would you have been that type of boss, or would you do things differently? If the answer to these questions is yes, you should consider the option of going on your own and opening a new business.

What drives you in business or in your career? What do you wish you had? Maybe you wish you had such a financial freedom that you can afford anything you want. You probably are also looking to spend more time away from work, and have the business work for you instead of the other way around. Maybe you would like to spend more time with family, friends and the people you love, more time traveling, more time doing things you enjoy. Especially if you live in the beautiful Aloha state, there is plenty to be enjoyed, and you are just so pressed for time with obligations at work that you barely have time to enjoy your surroundings.

So why not start your own business and be your own boss? You can spend a few years working on yourself and your idea, and grow your business to the level where it can provide you all the things you need and where it can fulfill all your need and the goals we mentioned above.

There are certain steps one needs to take in order to establish a business in Hawaii and this article will give you a few pointers. But bear in mind that there are aspects of the process that are worth consulting with an attorney or a business advisor about, as this is no legal document or an official guide to starting your business in the Aloha state. It will give you pointers, show you the options and if you, for example, plan on doing any sort of retail business, like purchasing wholesale liquidation merchandise to resell online, it will show you what a sales tax permit is, why you need it and how to register for one.

Preparing to Start a Business in Hawaii

Your first step will make the path afterward a lot easier if done correctly. This step is preparation, laying the foundations for your business. The Hawaii Department of Commerce and Consumer Affairs notes seven steps to business registration.

The first is to research the market. This research is very important. It can start with something simple like your idea, or the list of products and markets you would like to deal with or enter. Make a list and go on cross-referencing the markets for the items on your list. If you find that the products you are targeting are part of an oversupplied, saturated market, then it is better you stay away from this since it will be a lot harder to succeed, as a newly established business in an environment where the competition is fierce and the prices being thrown around leave almost no room for profit.

While this type of research can be done on your own, this is the first place where consulting an attorney is advisable. An attorney or a business advisor will have a network of people working with them and their resources mean you will be able to get the needed information faster. Not only that, but the information you receive will certainly be a lot more accurate and thorough.

This research will be the foundation of everything that follows. And what follows is the creation of a business plan. This is a plan that will map out all your steps towards starting your business. It is sort of a business checklist. Also, a business plan has to include projections of your revenue, profit, costs and various other scenarios which have the aim of determining whether your business is sustainable in the current environment, or market and what has to be done and what targets have to be achieved for it to be successful. It will also later serve as a key to unlocking additional funding for your business, should you need it. No financial institution, whether a bank or an investment firm will even consider the option of investing or loaning you the money if you don’t present a strong case for your business, a strong business plan. It is the first thing you will be asked to deliver.

But there is more to the research. If you happen to determine that your business would not make it in the current environment and the research results reveal other results, such as little niche markets where the demand outweighs the supply and where the competition is not as cut throat. It is advisable to search for such markets, especially if you are starting your first business and don’t have much experience.

What niche markets allow you to do is to gather additional experience, learn the ropes of the game while running a business in a less stressful environment. It will give you time to build your name and a customer base, and especially if you provide quality products and services, you will acquire the best of customers, the returning type. These customers will not only use your products and services in one market but follow you to any market you later expand to.

So now that you have set up a base, you know what you would like to do and what market to enter, you have a solid business plan, it is time to look at the legalities of registering a business in the Aloha state.

Registering a New Business in Hawaii

The first legal decision you will have to make in the business set-up and registration process is to choose the legal structure of your business. This is another case where you should consult an attorney. Each business entity or legal structure has its own advantages and potential flaws and the best option for you might depend on your plans, goals, the size and potentially the type of your business. Each of these business structures has their own registration process and later separate tax obligations and responsibilities.

The structures include sole proprietorships, general partnerships, limited partnerships, limited liability partnerships, limited liability limited partnerships, corporations and limited liability companies (LLCs). Sole proprietorships and general partnerships are the simplest and least expensive and complicated business structures you can choose and require no legal registration with the Hawaii Department of Commerce and Consumer Affairs, while other business types might need filing articles of incorporation, certificates of partnership and such. To learn the specific characteristics of each structure and what exactly you might need to do when registering each of them, and for more information, in general, read this DCAA’s Guide to Choosing the Right Legal Form for Your Business.

Once you have decided on your business structure, turn your attention to the business name. Business name registration is also carried out through the Department of Commerce and Consumer Affairs, its Business Registration Division. You can make sure you are using a unique business name and that no one else has registered that name before you on this link.

Now, depending on your line of business as well as the business structure, you might have to file for certain permits. DCCA Business Action Center’s website provides all the required information when it comes to specific licenses and permits. Hawaii also has four counties and some county-specific licenses may apply so it is advised you do explore all the requirements.

Hawaii Sales Tax Permit

We are now going to discuss a very important and complex part of this process: your tax requirements. The Business Action Center Website notes that there are federal, state and local governments and you might have to check with all the levels to see which rules apply to your business. You will first have to register for a Federal Employer Identification Number (EIN) which is administered by the Internal Revenue Service (IRS) and can be applied for online.

Your next step is to look at the state tax requirements and the permits you might need. These are administered by the Hawaii Department of Taxation. Now, while other states have what we know as a sales tax permit, Hawaii is a bit different, since it has a General Excise Tax (GET). Hawaii imposes a 4 percent or 4.5 percent (Oahu) General Excise Tax on all gross income. If you are in any form present as a seller, or retailer in Hawaii you are required to apply for a General Excise Tax permit.

The application process can be completed online or by filing papers with the Department of Taxation. You have to complete the BB-1 Packet and submit it with a one-time fee of $20. The Department of Taxation suggests this application is mailed to the address provided in the Contact Details section below, or it can be filed at any of the district offices.

You are required to provide personal identification information such as the social security number (SSN), address and similar data. You will also have to provide your Employer Identification Number (EIN), your business structure type, the accounting period, whether you are using a calendar or a fiscal year, as well as your accounting method and other information which will depend on the type of your business.

Filing manually or mailing in the application will mean you will have to wait up to 15 business days to receive your permit. However, if you would like to cut this waiting period to 3-5 days, you may also wish to file online through the Hawaii Business Express website. However, once you do receive your permit, you are not required to renew it.

Sales Tax Exemptions in Hawaii

With Hawaii not having a sales tax permit like the other states, and instead of having the General Excise Tax, you may wonder if there are any options to make purchases without paying tax. Luckily, there are exemptions in Hawaii as well. However, once again, Hawaii is slightly different from other states. While sales tax is applied to customers, meaning if you are buying you are charged sales tax as well, in Hawaii, it is the seller who has to pay the General Excise Tax.

The catch is that, while you may be able to make purchases tax free, you will be paying tax on resale. You may point out to the customer that the GET is included in their purchase price and if they agree to pay it, you are making a tax free sale in essence.

However, there is also a way for you to cut the GET to 0.5 percent from the 4 or 4.5 percent charged by the Hawaii tax authority and this is by providing a Hawaii resale certificate (Form G-17). In other states, sale for resale is tax exempt, in Hawaii, there is still a small percentage of tax you have to pay.

If you are making a purchase, make sure to provide the vendor with a properly filled out resale certificate. The good thing is that once you provide the vendor with a resale certificate for one purchase, every other purchase will be taxed at the reduced rate unless any details in the status of your business change. As a buyer, it is also important that you keep signed copies of the resale certificates you have provided to your vendors over time.

If you, however, find yourself in the role of a seller, you should only accept the certificate at the time of the transaction and only if it has been filled out completely and signed by the buyer. When accepting a resale certificate, you are accepting it in good faith and have the right to refuse it if you believe that the goods sold will not be used for resale. Also, as well as keeping copies of the resale certificates you give, you should also keep the resale certificates you receive on record.

Contact Details

Department of Taxation

General Excise License Applications
P.O. Box 1425
Honolulu, HI 96806-1425

Business Action Center

1130 North Nimitz Highway
Second Level, Suite A-220
Honolulu, Hawaii 96817
Phone: (808) 586-2545
Fax: (808) 586-2544
Email: [email protected]

State of Hawaii Department of Commerce and Consumer Affairs

King Kalakaua Building
335 Merchant Street
Honolulu, Hawaii 96813

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