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Q: General Excise Tax in Hawaii ( Answered 5 out of 5 stars,   1 Comment )
Subject: General Excise Tax in Hawaii
Category: Business and Money > Accounting
Asked by: beton7-ga
List Price: $50.00
Posted: 28 May 2005 20:19 PDT
Expires: 27 Jun 2005 20:19 PDT
Question ID: 526817
I own an internet business, that is incorporated in Nevada, and does
business in Nevada. The business sells software (such as windows,
office, antivirus ect) I am considering a move to hawaii however the
general excise tax of %4 of gross sales seems absolutely rediculous.
on average I do 250,000 a month in gross sales, however margins are
slim because there is alot of competition. My understanding is that
Hawaii will want over 8,000 a month. My question is what ways, if any
are there to avoid this tax. I will be doing business out of my
(leased) condo in hawaii. I am the only employee and all of my sales
are sent out via usps or ups (no walkin customers or retail space)

Request for Question Clarification by pafalafa-ga on 28 May 2005 21:05 PDT

I've had a look at some of the available materials on the General ,
and from what I can see, sales that are shipped out of the state of
Hawaii are not subject to the GET, so the 4% would only apply to the
(presumably small) amount of shipments that you send in-state.

However, before checking into this more deeply to get more details, I
feel it wise to bring your attention to the disclaimer on the bottom
of this page.  We are no substitute for professional tax advice.

I can find out additional details for you on the GET, if you'd like,
especially as regards your particular situation.  But you'll probably
still need to confirm things with a tax professional.

Shall I proceed...?


Clarification of Question by beton7-ga on 28 May 2005 22:23 PDT
Yes, I would appreciate that. I do have an accountant but I have not
yet brought this up to her. If you are able to provide a source / more
information on goods being shipped out of the state of hawaii not
being subject to the General excise tax it would give my accountant a
solid starting point for setting things up for my move. Please feel
free to proceed, and thanks in advance for you help.

Request for Question Clarification by hummer-ga on 29 May 2005 06:50 PDT
Hi beton7,

Given that pafalafa hasn't responded to your reply yet and the
question isn't locked, I've had a look and agree that you will not be
liable for the payment of GET on out-of-state sales.  I'd be happy to
post relevant links but will wait to hear from paf first.

Subject: Re: General Excise Tax in Hawaii
Answered By: pafalafa-ga on 29 May 2005 08:57 PDT
Rated:5 out of 5 stars
It's hard to believe, but Hawaii's tax code appears to be even more
convoluted than that of the IRS, and their website considerably less
user-friendly.  I didn't think either of these was possible!

However, with some persistence, I was able to find the documentation
that appears most appropriate to your situation, and that also
indicates that sales to out-of-state customers are NOT subject to the
General Excise Tax.

The most relevant document is this:

June 23, 1998

RE: General Excise Tax Exemption for Tangible Personal Property,
Including Souvenirs and Gift Items, Shipped out of the State

and the key excerpts from this document are as follows:

...The place of delivery of tangible personal property determines
whether a sale is subject to the general excise tax

...The general excise applicable to the gross income received
from the sale of tangible personal property only where the place of
delivery is in the State.

...Applicable Law -- The value or gross proceeds arising from the
manufacture, production or sale of tangible personal property
(property) which is shipped by the manufacturer, producer, or seller
(Taxpayer) to a place outside the State, where such property is
resold, consumed, or used outside the State is not subject to the
general excise tax. Haw. Rev. Stat. section 237-29.5(a)(1) (Supp.

The above document also indicates that there are paperwork
requirements for documenting the sales to out-of-state customers, but
also says there are exemptions or alternatives to filing forms, when
you have, e.g., a receipt or order form from a customer with an
out-of-state address.  The language isn't too clear on this, and the
advice of an accountant certainly seems warranted here.


The state seems to adamantly avoid giving an example of the
out-of-state exemption as pertaining to internet sales...why provide
anything so obviously helpful?

However, there is a "Tax Facts" sheet that comes close:
Revised July, 2000 
Tax Facts 96-1

14. If an out-of-state buyer comes to Hawaii, orders goods from a
Hawaii seller, and then has the seller ship the goods out of Hawaii,
is the sale subject to the general excise tax?

Whether the sale is taxable or not depends on the facts and
circumstances regarding that transaction.

IF the buyer selects the goods and enters into an agreement with the
seller for the delivery of the goods at a location outside Hawaii, and
if the goods will be shipped at the seller's risk and expense
(although the seller may add an additional charge to cover the
shipping and handling expenses), then the sale is not subject to the
general excise tax.

EXAMPLE 1 - Tourist T from California comes to Hawaii and selects a
large vase from Business F. Rather than risk breaking the vase during
travel, T has F pack and deliver the vase to T's home for an
additional shipping and handling charge, with the assurance that F
will replace the vase if it is lost or damaged in shipping. F is not
subject to the general excise tax on the gross income from this sale.

IF the buyer purchases the goods from a seller in Hawaii and leaves
the store with the purchased goods, then the sale is subject to the
general excise tax even if the buyer subsequently ships the goods to a
location outside Hawaii.

EXAMPLE 2 - Tourist U from Japan comes to Hawaii and purchases
souvenirs from Business G. G puts the purchased souvenirs in a bag and
gives them to U. G is subject to the general excise tax on the gross
income from this sale.


Lastly, the actual instructions for filing GET returns can be found here:

and includes the following exemption:

Out of State Sales: The value or gross proceeds received by a
manufacturer, producer, or seller of tangible personal property
shipped to a point outside of the State where it is resold or
otherwise consumed or used outside the State are exempt. Report and
explain these amounts. For more information, see Tax Information
Release No. 98-5. (Section 237-29.5(1).)

Well...there you have it.  I think the language is pretty clear that
out of state sales are not subject to the GET (and as far as I can
tell, are not subject to much paperwork either, as long as you keep
regular records).  But as a reminder, I'm not a tax expert, nor do I
play one at Google Answers, so please consult with an appropriate
professional as you see fit.

I hear Hawaii is paradise.  Enjoy!


search strategy -- Google searches on: 

[ hawaii "general excise tax" ]
[ hawaii "general excise tax" out-of-state ]
[ hawaii "general excise tax" instructions ]
beton7-ga rated this answer:5 out of 5 stars and gave an additional tip of: $25.00
pafalafa, Thank you for the great research, after I had posted the
question and clarifaction I had come across the tax facts that you
referenced, however you answer was even better. Thanks again I will be
enjoying hawii alot more knowing that I am not giving them 4% of my
gross sales :-)

Subject: Re: General Excise Tax in Hawaii
From: pafalafa-ga on 29 May 2005 22:16 PDT
Thanks so much...and have a wonderful, largely-G.E.T-free adventure in Hawaii.


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