Small Business Taxes in Hawaii | Our Essential Guide

Steve Bennett
Business Formation Expert  |   Fact Checked by Editorial Team
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Hawaii Small Business Taxes

Owning and operating a small business in Hawaii is exciting and fulfilling. However, it also comes with responsibilities, including staying informed about Hawaii tax laws and ensuring that your Hawaii business complies with all applicable regulations. If you will start a Limited Liability Company in Hawaii, this one’s for you! 

This comprehensive guide will walk you through the critical aspects of Small Business Taxes in Hawaii. Understanding different taxes allows you to make informed decisions that will benefit your business and help you stay on the right side of the law.

Webinarcare Editorial Team will help you easily understand small business taxes in Hawaii. You must be guided by all the factors gathered in this article.

Small Business Tax Law in Hawaii

Hawaii’s small business tax law defines and outlines the tax obligations and exemptions for various businesses, including Limited Liability Companies (LLCs). These laws comprise various taxes that small businesses must comply with for income, sales, payroll, property, and other industry-specific taxes. Each type of tax presents unique implications for small businesses, and navigating through this maze can be quite challenging. Therefore, understanding these taxes in detail is crucial for LLCs as it aids in effective tax planning and helps avoid non-compliance penalties.

LLCs in Hawaii enjoy certain benefits under the small business tax law. Generally, an LLC is considered a pass-through entity, and its profits are passed directly to its owners, who then report this income on their personal tax returns. This differs from starting a corporation in Hawaii that faces double taxation on corporate profits and dividends. However, it’s noteworthy that the taxable profit of an LLC is not just the cash the owners take out – it includes the company’s overall profits.

So, appropriate measures must be taken to ensure accurate reporting and minimize tax liabilities as much as possible. Tax laws concerning LLCs often change, and keeping abreast of these updates plays a pivotal role in the successful running of the business. If you are still looking for an LLC service to help you with your taxes, we reviewed these services, including the top features and affordable prices.

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Type of Taxes For Small Businesses in Hawaii

Starting a business in Hawaii significantly contributes to the local economy. However, operating such businesses here requires an in-depth understanding of the types of small business taxes. Small businesses must adhere to these taxes’ specific regulations, rates, and filing deadlines to avoid penalties and operational interruptions. These taxes include but are not limited to:

  • Income Tax: Typically, all businesses in Hawaii must file an income tax return and may need to pay capital gains tax on any profits. The income tax rate in Hawaii can range from1.4% – 11% (depending on income).
  • Sales Tax: Businesses in Hawaii that sell physical products might be required to collect sales tax on transactions and forward it to the Hawaii government. The sales tax rate in Hawaii is 4.00%.
  • Payroll Tax: If a business in Hawaii has employees, it is responsible for withholding payroll taxes from the employee’s wages and transferring them to the relevant tax agency.
  • Property Tax: Businesses that own property in Hawaii may be subject to a property tax varying from county to county. The property tax rate in Hawaii is 0.27%.
  • Franchise Tax: Some states, including Hawaii, may have a franchise tax, which applies to businesses simply for the privilege of operating in that state. Hawaii does not have a franchise tax for LLCs.
  • Self-Employment Tax: Sole proprietors and freelancers in Hawaii may be required to pay self-employment taxes, covering social security and Medicare costs.
  • Excise Tax: Some businesses may be liable to pay excise taxes, typically applied to certain goods and services such as alcohol, tobacco, and gasoline.
  • Unemployment Insurance Tax: Employers in Hawaii might be required to pay unemployment insurance taxes, which fund unemployment benefits for workers who lose their jobs.

Understanding the types of small business taxes in Hawaii is the first step towards financial transparency. Remember, when you start an LLC, you’re not only launching a business, you’re also taking on a mantle of fiscal responsibility. Stay informed, stay compliant, and contribute to the growth of Hawaii’s economy.

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Calculate Taxes in Hawaii

Understanding how to calculate taxes for small businesses in Hawaii. You will not just fathom the different taxes and how they work but also how you came up with them. Here is how you calculate taxes in Hawaii.

  • Income Tax: Business income tax is calculated based on the profits reported on your income tax return. The amount of tax due will be based on the tax rate in your specific tax bracket.
  • Sales Tax: To calculate sales tax, multiply the total sales receipts by the sales tax rate in Hawaii. The sales tax amount should be added to the customer’s price for goods or services.
  • Payroll Tax: Payroll taxes include federal income tax, Social Security, and Medicare taxes. You can use the tax tables or tax calculator provided by the IRS to calculate these taxes. In addition, employers are responsible for paying the Federal Unemployment Tax (FUTA).
  • Property Tax: Property taxes are calculated by multiplying the property’s assessed value by the local property tax rate.
  • Franchise Tax: Franchise tax calculation varies by state. It could be based on your net worth, income, or a flat fee. Consult the Hawaii Department of Taxation for details.
  • Self-Employment Tax: Self-employment tax consists of Social Security and Medicare taxes. To calculate it, multiply your net profit from self-employment by 15.3%.
  • Excise Tax: Excise taxes are usually included in the product’s price, like gasoline or alcohol, and are often levied per unit (like per gallon or bottle) rather than as a price percentage.
  • Unemployment Insurance Tax: These rates vary by state and by the individual employer’s experience rating. The employer’s experience rating is based on the benefits paid to former employees, so new businesses in Hawaii usually have a relatively low rate.

It is recommended to consult a tax professional to ensure accuracy and compliance with all relevant tax laws.

File and Pay Business Taxes in Hawaii

The process of filing and paying taxes in Hawaii can be broken down into several steps. Here is a step-by-step guide on how to go about it:

  1. Gather all relevant documents: Collect all the necessary paperwork, including W-2 forms from your employer(s), 1099 forms for freelance or self-employment income, income statements from banks or financial institutions, and any other relevant receipts or records.
  2. Determine your filing status: Assess your marital status and household situation to determine the appropriate filing status, such as Single, Married Filing Jointly, Married Filing Separately, Head of Household, or Qualifying Widow(er) with Dependent Child.
  3. Choose a filing method: In Hawaii, you can file taxes electronically using tax software or prepare a paper return. Electronic filing is generally faster, more convenient, and can minimize errors. You can file your taxes by mail and submit them to the Hawaii Department of Taxation.
  4. Calculate your taxable income: Calculate your total income by adding up all your earnings, including wages, tips, self-employment income, dividends, and interest. Deduct any eligible adjustments and deductions to arrive at your taxable income.
  5. Complete the tax return: Fill out the Hawaii tax forms electronically or on paper based on your chosen filing method. Take your time to review and double-check the information provided to minimize errors.
  6. Submit your tax return: If filing electronically, follow the instructions provided by the tax software to submit your return electronically. If filing on paper, mail your completed tax return to the Hawaii Department of Taxation. Include any required forms, schedules, and copies of your W-2 or other income statements.
  7. Determine your payment method: Calculate the taxes owed or the refund due. If you owe taxes, there are several payment options available, such as electronically via direct debit or credit card, by mail with a check or money order, or through an electronic funds transfer. Choose the payment method that suits you best.
  8. Pay your taxes: Submit your tax payment by the Hawaii deadline. Ensure the payment is postmarked by the due date to avoid penalties or interest charges.
  9. Keep copies for your records: Make copies of all documents associated with your tax return, including the completed forms, payment proof, and any supporting documentation. Store these records in a safe place for future reference.

Remember to consult Hawaii’s official tax website or seek professional advice to ensure compliance with any specific tax regulations or updates in the state.

Small Business Tax Deductions

Tracking and claiming deductions for your Hawaii small business can significantly reduce your tax burden. Some common deductions available to small businesses in Hawaii include:

  • Business Expenses: Ordinary and necessary expenses, such as rent, utilities, and office supplies, can be deducted from your income.
  • Depreciation: The cost of business property, such as equipment, vehicles, and buildings, can be deducted over a specified period. Knowing it has tax deductions is better if you plan to create a rental property for your Hawaii LLC
  • Employee Wages and Benefits: Employees’ salaries, wages, and benefits can be deducted as a business expense. 
  • Business-related Travel and Meals: Expenses incurred while traveling for business purposes or meals consumed during business meetings can be deducted, subject to certain limitations.
  • Home Office Deduction: If you use a portion of your home exclusively for business purposes, you may be able to deduct a portion of your home expenses, such as mortgage interest, property taxes, and utilities.
  • Retirement Plan Contributions: Contributions made to a qualified retirement plan for yourself and your employees can be deducted as a business expense.

Hire a Tax Professional in Hawaii

Accurate tax filing requires a certain level of expertise. Recognizing this, seeking the services of a good tax professional in Hawaii can be beneficial for your small business. Hiring a tax professional will safeguard you from possible mistakes and help you maximize your tax savings. Considering their value, selecting the right professional becomes crucial.

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Sanctions For Not Filing Small Business Taxes in Hawaii

Sanctions and penalties exist for not paying taxes for a small business in Hawaii. The specific sanctions and penalties can vary depending on the amount owed and the time the taxes remain unpaid. Some common sanctions and penalties for unpaid small business taxes in Hawaii include:

  • Late payment fees
  • Interest charges on unpaid taxes
  • Revocation of business license
  • Seizure of business assets
  • Legal action, such as wage garnishment or liens on the property.

Paying small business taxes on time and in full is important to avoid these sanctions and penalties. Suppose you are unable to pay your small business taxes. In that case, it is recommended that you contact the Hawaii Department of Taxation or a tax professional to discuss payment options and avoid any penalties.

Where Do I File My Small Business Taxes in Hawaii?

Small business taxes in Hawaii can be filed with the Hawaii Department of Taxation or a state-approved online tax filing service. The specific process for filing small business taxes can vary depending on the business entity type and the revenue earned during the tax year. It is recommended that small business owners consult with a tax professional or visit the Hawaii Department of Taxation website for more information on how to file small business taxes in Hawaii.

FAQs

What is the Hawaii General Excise Tax?
The Hawaii General Excise Tax (GET) is a tax on the gross income of most businesses and it is required by law.
Who is required to pay the Hawaii General Excise Tax?
All businesses that earn income in Hawaii, regardless of their size or industry, are required to pay the GET.
How much is the Hawaii General Excise Tax?
The Hawaii General Excise Tax rate is variable and ranges from 0.15% to 4.5% depending on the type of business activity.
What is the deadline to file Hawaii state taxes?
The deadline to file Hawaii state taxes is April 20th, or the next business day if the 20th falls on a weekend or holiday.
Is there a penalty for late filing or late payment of Hawaii state taxes?
Yes, there is a penalty for late filing and late payment of Hawaii state taxes. The penalty is 10% of the tax due plus interest.
Are there any tax credits available for small businesses in Hawaii?
Yes, there are several tax credits available for small businesses in Hawaii, such as the Solar Energy System Tax Credit and the Research Activities Tax Credit.
What is the minimum income requirement for Hawaii state taxes?
There is no minimum income requirement for Hawaii state taxes. All businesses that earn income in Hawaii are required to file and pay taxes.
How do I obtain a Hawaii tax ID number for my small business?
You can apply for a Hawaii tax ID number online through the Hawaii Department of Taxation’s website or by submitting the appropriate form through mail.
What should I do if I suspect tax fraud in Hawaii?
If you suspect tax fraud in Hawaii, you should report it to the Hawaii Department of Taxation immediately.
Are there any additional taxes that small businesses in Hawaii should be aware of?
Yes, businesses in Hawaii may be subject to additional taxes such as the transient accommodations tax, the fuel tax, and the conveyance tax.
Can I file my Hawaii state taxes electronically?
Yes, you can file your Hawaii state taxes electronically through the Hawaii Department of Taxation’s website.
What tax deductions are available for small businesses in Hawaii?
Small businesses in Hawaii may be eligible for tax deductions for expenses such as office rent, equipment, and employee salaries.
How do I register my small business in Hawaii?
You can register your small business in Hawaii by filing for a business license through the Hawaii Business Express portal.
How can I estimate my Hawaii state tax liability?
You can estimate your Hawaii state tax liability by using the Hawaii Department of Taxation’s tax calculator or by consulting with a tax professional.
Is there a sales tax in Hawaii?
No, Hawaii does not have a statewide sales tax, but some localities in Hawaii may have additional taxes on goods and services.
Do I need to collect Hawaii state sales tax on my small business?
No, small businesses in Hawaii are not required to collect state sales tax, but they may be subject to other taxes such as the GET.
Are LLCs taxed in Hawaii?
Yes, LLCs in Hawaii are taxed on their income and subject to the Hawaii GET.
Do I need to file Hawaii state taxes for my small business if I am a sole proprietor?
Yes, as a sole proprietor in Hawaii, you are responsible for reporting and paying taxes on your business income.
What is the Hawaii Corporate Income Tax?
The Hawaii Corporate Income Tax is a tax on the income of corporations and other business entities registered in Hawaii.
How do I file Hawaii state taxes online?
You can file Hawaii state taxes online through the Hawaii Department of Taxation’s website using a web browser.
What should I do if I cannot pay my Hawaii state taxes on time?
If you cannot pay your Hawaii state taxes on time, you should contact the Hawaii Department of Taxation to explore payment options.
Are there any tax breaks available for new small businesses in Hawaii?
Yes, there are several tax breaks available for new small businesses in Hawaii, such as the New Business Investment Tax Credit and the High Technology Business Investment Tax Credit.
What is the Hawaii Taxpayer Bill of Rights?
The Hawaii Taxpayer Bill of Rights outlines the rights and responsibilities of taxpayers in Hawaii and outlines the procedures for appeals and other situations.
Are there any property tax breaks available for small businesses in Hawaii?
Yes, small businesses in Hawaii may be eligible for property tax breaks under certain conditions, such as if they use green building practices, are located in a designated enterprise zone, or engage in agricultural activities.
How do I qualify for the Hawaii Research Activities Tax Credit?
To qualify for the Hawaii Research Activities Tax Credit, a business must perform qualified research and development activities within Hawaii, in collaboration with a university, or have a written agreement with the Hawaii State Government.
Are nonprofit organizations in Hawaii exempt from paying taxes?
Depending on their tax-exempt status with the IRS, nonprofit organizations in Hawaii may be exempt from state taxes.
What is the Hawaii Unemployment Tax and who pays it?
The Hawaii Unemployment Tax is a tax paid by Hawaii employers to fund unemployment benefits for workers who have lost their jobs.
Can I deduct health insurance premiums for my small business in Hawaii?
Yes, small businesses in Hawaii may be eligible to deduct health insurance premiums for employees under certain conditions.
Is there a minimum tax liability for businesses in Hawaii?
Yes, businesses in Hawaii are required to pay a minimum $20 tax, even if they have no gross income.
What is the Hawaii state general excise tax and how does it apply to my small business?
The Hawaii state general excise tax is a tax on business income implemented by the state and it applies to all business transactions that involve selling goods or services in Hawaii.
How do I register for a general excise tax license in Hawaii?
To register for a general excise tax license in Hawaii, you will need to fill out an application either on online or in-person, pay a fee, and provide additional documentation depending on your business structure.
What is the sales tax rate in Hawaii for my small business?
Hawaii does not have a traditional sales tax, but instead has a gross receipts tax system, which similar to a sales tax that varies based on the county and type of business.
How do I calculate the gross receipts tax for my Hawaii business?
The gross receipts tax calculation method for your Hawaii business depends on the county and revenue your company earns each year. You need registered for a general excise tax license to review the specifics.
How do I file and pay my Hawaii gross receipts taxes?
You can file and pay your Hawaii gross receipts tax online or by mail, with requirements and deadlines depending on county. You can also look for the form G-60 to register for remitting Gross Receipt Tax online if your income accounts to more than $4 million.
Are there any exemptions for having to pay Hawaii small business taxes?
Depending on the business activity you are undergoing there can be exemptions made available, such as those regarding fuel, rental of products, etc.
How do I determine if my Hawaii business will owe federal income taxes to the IRS and Hawaii state taxes?
If your business earns income which constitutes to flow and profit then it is definite that there will be a need of tax registration and payment.
Does the state of Hawaii have a tax deduction for small businesses?
If qualified, small businesses can earn tax credits and rebates for utility funding under Act 226.
Can having a small business in Hawaii affect my personal taxes?
Depending on the county, eligibilities on personal tax direct from the business income kept pushing down expenses which makes possibilities of an entangled behavior present.
Are there any statewide incentives or programs for small businesses in Hawaii related to taxes?
Yes. Several tax incentives with Act 221 found exclusively in Hawaii.
What happens if I missed the deadline to file or pay my Hawaii state taxes for my small business?
A late tax file will attract penalty of 10%, along with interest associated of 12% simple/year on the $ amount being untimely since the last filing date.
How do I apply for the Hawaii General Excise Tax Exemption for my small business?
If there is legitimacy that your business could gain an exemption from Hawaii GET law you apply using form G-61 – Application for Exemption from General Excise taxes.
Are there any tax deductions on Hawaii business tax returns that I can claim?
There is a variety of tax allowable deduction other than the traditional accounting expense standard used at federal level reported under form N-11.
Does the State of Hawaii offer any tax relief or assistance to small businesses that have been impacted by the COVID-19 pandemic?
Depending on the eligibility, Maui County offerings includes property tax window for vendor’s although every year intended funds are reduced.
How can I make estimated payments for my Hawaii business taxes?
Online and hard copies payments of generation excise taxes are accepted methods other than payments for lodging tax and rental motor vehicles can be made according to their requirements parallelly.
Does the state of Hawaii have any tax incentives for local Hawaii small businesses to export goods internationally?
Several initiatives implemented can attract investment in an attempt to bolster tourism appeal and local community demands considering employment for businesses having connections to the community based prototype.
Is Social Security and Medicare tax amounts similar for small businesses in Hawaii and the nation?
Lasting towards the FICA combination all company wages contribute tax amount for Social Security and Medicare as declared rightfully irrespective of company address by Form 941.
Does Hawaii have any special payroll taxes that apply to small businesses?
Hawaii has a State tax that applies for different classes of employment.
How do I determine which IRS forms need to be filed for my Hawaii small business?
You can obtain in-part publications from the state government guidelines and publications to evaluate the type of authorization needed along with the device of business registration scope necessary.
Does Hawaii offer any tax incentives to small businesses that hire new employees from the state of Hawaii?
Hawaii Small-Business grants to help forgivable loans and cover payroll taxes can spread for those staying applicable amounts in an act under Keiki-Pailii Workforce Plans.
Do I need to register for workers’ compensation insurance in Hawaii for my small business?
Any company owning an inhabitance paid employee in Hawaii are required to apply for workers’ compensation within Hawaii administration setup.
Are there any special rules or exemptions that my small business needs to be aware of when it comes to paying federal and state payroll taxes in Hawaii?
The variety of rules extends with agreement reached by commitments setup in islands regulation suitable during intricate small-business setup.
Does Hawaii offer anything special I should know about small businesses that operate as LLCs, S Corps, or C Corps?
A benevolent Grant-In-Aid legislation act formally implemented regarding Island certified Small-business booster act assists premium relief programs of 290 dedicated businesses uniting in Hawaii.
Should I incorporate my Hawaii small business?
Decision bases are empirical reasoning and ultimately depend on the business class to register for taxes after successfully mandatory business incorporation.
How do Hawaii small businesses determine estimated payments for their federal payroll taxes?
The requirements published beforehand from a valid accounting authority guide down your estimated payments made towards the supporting pocket of federal taxes consequently.
What financial recordkeeping is important to stay organized while keeping up with small business taxes in Hawaii?
Irrespective of the area, track your immediate transaction flow-through including dynamic record of incoming and outgoings executing business miscellaneous expenses.
How will including deductions on my Hawaii federal income tax return affect my refund or the amount I owe?
Prior knowledge of tax directorate accumulation an accurate financial grade influences yearly deductions. Keeping upfront integrity assured to forfeit heavy account maintenance.
I am starting a small business in Hawaii, What should I know about state tax law before I begin?
It’s advised to fact based research before a move geared retention as evidenced by accumulation regarding fluctuation credible behavior bases despite reorganization in on-the-face style.

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Conclusion

Understanding and complying with small business tax laws in Hawaii is crucial for the success of your business. By staying informed about filing requirements, tax rates, deductions, and credits, you can make informed decisions that will benefit your business and help you avoid potential tax penalties. Consider consulting with a tax professional to ensure your small business fully complies with all applicable tax laws in Hawaii.

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