DAVID Y. IGE

LINDA CHU TAKAYAMAGOVERNORDIRECTORJOSH GREEN, MD

DAMIEN A. ELEFANTE

LIEUTENANT GOVERNOR

DEPUTY DIRECTOR

STATE OF HAWAII
DEPARTMENT OF TAXATION830 PUNCHBOWL STREET, ROOM 221
HONOLULU, HAWAII 96813
http://tax.hawaii.gov/
Phone: (808) 587-1577 / Fax: (808) 587-1584
Email: Tax.Rules.Office@hawaii.gov

June 7, 2019

DEPARTMENT OF TAXATION ANNOUNCEMENT NO. 2019-04
RE:Hawaii County Surcharge on General Excise Tax and Rate of Tax Visibly Passed on toCustomers, Effective January 1, 2020

On June 29, 2018, Hawaii County enacted Ordinance No. 18-74 which authorized theimposition of a county surcharge (CS) on general excise tax (GET) beginning on January 1, 2019and ending on December 31, 2020 at the rate of 0.25%. On March 25, 2019, Hawaii County
subsequently enacted Ordinance No. 19-29 which authorized the imposition of an additional CS
at the rate of 0.25% beginning on January 1, 2020. Ordinance No. 19-29 also extended thesunset date from December 31, 2020 to December 31, 2030. Thus, beginning on January 1, 2020and ending on December 31, 2030, the CS rate for Hawaii County will be 0.5%.
As a general rule, the CS only applies to transactions where the retail rate of 4% applies;
the CS does not apply to wholesale sales or insurance commissions where the GET rates are
0.5% and 0.15% respectively. Since the retail GET rate is 4%, the total rate of tax imposed ontransactions subject to the Hawaii CS is 4.5%. For guidance regarding the sourcing of income
between counties, please see Hawaii Administrative Rules sections 18-237-8.6-01 to 10.
Rate of Tax Visibly Passed on to Customers
GET is levied on the gross receipts of a business, including amounts that are passed on
and collected as GET from customers. To account for this imposition, the maximum rate that
may be passed on to customers is higher than the statutory rate of 4.5% (4% GET + 0.5% Hawaii
CS). However, a seller is prohibited by consumer protection law from visibly collecting morethan the amount actually owed.
The maximum rate that may be visibly passed on in Hawaii County is 4.712%. This
pass on rate is limited to six decimal places and is calculated as follows. When the taxes arevisibly passed on the gross receipts consist of the price and tax. The price represents 95.5% of
the gross receipts and the tax represents 4.5% of the gross receipts. The tax stated as a percent of
the price is 0.047120 or 4.712% (4.5% divided by 95.5%).
It is important to note that the 4.712% rate is the maximum rate of tax that may be visiblyDepartment of Taxation Announcement No. 2019-04
June 7, 2019
Page 2 of 2

passed on. Sellers may also pass on the tax at the statutory rate of 4.5% or may elect not tovisibly pass on the tax at all.
The following example illustrates why the maximum visible pass on rate is greater than
the statutory rate. Assume that the purchase price is $1,000, that the pass on rate is 4.5%, and theamount collected as tax is $45.00. The GET due is $41.80 ($1,045.00 x 4%) and the Hawaii CS
due is $5.22 ($1045.00 x 0.5%) for a total of $47.02 due. The amount visibly passed on as taxes
was $2.02 less than was due on the transaction. If the taxes were passed on at the maximum rateof 4.712%, $47.12 would have been collected as tax on the transaction. The GET due would
have been $41.89 ($1,047.12 x 4%) and the Hawaii CS due would have been $5.23 ($1,047.12 x0.5%) for a total of $47.12 due.
For general information about GET, see Tax Facts 37-1. If you have any questions
regarding this Announcement, please contact the Technical Section by email attax.technical.section@hawaii.gov or by phone at (808) 587-1577.

LINDA CHU TAKAYAMA
Director of Taxation