General Excise Tax on Rental Income Hawaii

[Chris Hicks]

Hello All, 

Just trying to get some clarification on why HI has a GET (General Excise Tax) on gross rent.  I have searched around with no answers.  I understand that you have to pay taxes on rental PROFIT.  But HI charges a GET on gross income regardless if you make a profit or not, then again for the profit once you file your yearly annual taxes for State.  The State requires you to file for your GET tax monthly, quarterly, or semi-annually depending on the amount of GET you will owe.  The State says the GET is for any business operated in HI.  But again to my knowledge your getting taxed twice.  Any clarification would be greatly appreciated.

[Paul Winchell]

@Chris Hicks

There are three separate Hawaii state taxes you will be responsible for when operating a rental in Hawaii.  First, General Excise Tax, which as you stated is required of all businesses in Hawaii.  It is Hawaii's version of a sales tax, only it applies to all business transactions.  Then there is the Transient Accommodation Tax which is applied to all rentals of less than 180 days (pay close attention to this if renting short term).  Both of these are business taxes and applied to gross income regardless of profit.  The state will take their cut regardless of whether your business is profitable.  It is standard practice to pass these taxes on to the consumer -- For instance, if you stayed at a hotel in Waikiki for $200/night, your actual bill might come to $250 as these taxes and other hotel surcharges get added on top of the nightly rate. If you rent an apartment for 1 year at $2000/mo it is common that the actual cost will be $2000 plus GET.  Be clear in your lease about how those taxes are being collected (included vs additional charge).

And finally you will have to pay state income taxes on personal income generated in the state (minus deductions).  

In all you will pay (up to) three different taxes, but they should all be considered separately and none of them will be collected twice.  Make sure to consider all of them when you calculate your bottom line for operating a rental in Hawaii.

I am not a tax professional and this should in no way be considered tax advice.  It is always a good idea to consult a tax professional to fully understand your liabilities.

Hope this helps.

--Paul Winchell