Aloha. For any business owner in Hawaii, those five letters—G-E-T—can bring a unique kind of headache. Hawaii’s General Excise Tax is one of the most misunderstood aspects of our local business landscape. It’s not just another line item; it’s woven into the very fabric of how we transact, and errors in handling it can be costly.
Many business owners, especially those new to the islands, operate under assumptions that can lead to bookkeeping nightmares and financial strain. But understanding the GET doesn’t have to be a mystery. The key is to separate myth from reality.
This guide will walk you through seven of the most common GET misconceptions. By understanding them, you can ensure your financial records are clean, accurate, and perfectly organized, making you better prepared for every aspect of your business’s financial cycle.
Disclaimer: This article is for informational purposes only and is not intended to be legal or tax advice. The Hawaii GET is complex, and you should always consult with a licensed CPA or tax professional for advice specific to your situation. The goal of this post is to help you understand these concepts for better bookkeeping practices.
Misconception #1: "GET is just a sales tax."
The Reality: This is the single most common misunderstanding. A sales tax is typically charged only on the final sale of a tangible good to the end consumer. Hawaii’s GET is fundamentally different. It is an excise tax on your gross business income, which includes everything from the sale of goods to income from services, commissions, and even rent.
The Bookkeeping Takeaway: Your accounting system must be set up to track all gross receipts, not just revenue from product sales. Every dollar that comes into your business is likely subject to GET, and your books need to reflect this reality for accurate financial reporting.
Misconception #2: "I don't need to charge GET on my services."
The Reality: Because GET is a tax on gross income, it applies to most services rendered in Hawaii. Whether you are a consultant, a graphic designer, a contractor, or a tour operator, the income you receive for your services is generally taxable under the GET. There are very few exemptions.
The Bookkeeping Takeaway: In your accounting software (like QuickBooks or Xero), every service item you offer should be correctly coded as taxable for GET purposes. Failing to do so means you are likely under-reporting your gross income and creating a major liability for your business.
Misconception #3: "I paid GET when I bought an item, so I don't have to charge it when I resell it."
The Reality: This line of thinking leads to one of the most infamous features of the GET: pyramiding. Because the tax is applied at every level of the transaction (manufacturer, to wholesaler, to retailer, to consumer), the tax is compounded. Even if you paid GET on items you purchased for your business, you are still required to collect and pay GET on your gross income from their eventual sale.
The Bookkeeping Takeaway: Meticulous record-keeping is crucial here. Your chart of accounts should clearly distinguish between wholesale income (taxed at 0.5%) and retail income (taxed at 4% plus county surcharges). This ensures you have a clean record of which rate applies to which income stream.
How GET Pyramiding Works
The Bottom Line: The same product has been taxed at multiple stages before reaching the customer. This is why it’s a “pyramid” and why you must track your own gross receipts regardless of taxes paid earlier in the supply chain.
Misconception #4: "The GET rate is just 4%."
The Reality: While the base rate for retail sales is 4%, it’s not the full story. As of July 2025, several counties have their own surcharges:
- Oahu: 0.5% (for a total of 4.5%)
- Kauai: 0.5% (for a total of 4.5%)
- Hawaii Island: 0.5% (for a total of 4.5%)
- Maui: 0.5% (for a total of 4.5%)
The Bookkeeping Takeaway: Your point-of-sale and accounting systems must be configured for the specific island(s) where you do business. If you have locations on multiple islands, your books must be able to track sales and GET liability by location to ensure you’re paying the correct total rate.
Misconception #5: "I can deduct my business expenses first, then calculate the GET."
The Reality: This confuses GET with income tax. For federal and state income taxes, you can utilize small business tax write offs to lower your taxable income. However, GET is calculated on your gross income, before any deductions for business expenses like rent, payroll, or cost of goods sold.
The Bookkeeping Takeaway: This highlights the importance of a fundamental bookkeeping principle: a clean Profit & Loss (P&L) statement. Your P&L should clearly show your “top-line” gross revenue. It is this top-line number, not your “bottom-line” net profit, that is the basis for your GET calculations.
Misconception #6: "Getting a resale certificate means I'm exempt from GET."
The Reality: A resale certificate (Form G-17) does not make you exempt from GET. It is a specific document used in wholesale transactions. When you present a resale certificate to a vendor, it allows you to purchase goods without paying GET at that step. However, you are then fully responsible for collecting and remitting the GET at the full retail rate when you sell that product to the final customer.
The Bookkeeping Takeaway: Proper documentation is key. If you make wholesale purchases, you must keep records of your resale certificates. If you make sales to other businesses who provide you with a resale certificate, you must keep their certificate on file and categorize that sale as “wholesale” in your books.
Misconception #7: "I only have to file my GET return once a year."
The Reality: Filing frequency depends on your annual GET liability. While very small businesses might file annually, most businesses are required to file quarterly or even monthly. The Hawaii Department of Taxation determines your filing frequency, and as your business grows, your requirement can change.
The Bookkeeping Takeaway: Your bookkeeping provides the data to anticipate this. By maintaining accurate, up-to-date monthly books, you can see your GET liability in real-time. This prevents surprises and ensures you know when you might cross the threshold into a more frequent filing requirement, allowing you to stay prepared.
The Foundation for Success is Meticulous Bookkeeping
Navigating the complexities of the GET can be daunting. The common thread in all these misconceptions is that errors and liabilities arise from one place: disorganized or inaccurate financial records.
When your books are clean, organized, and professionally managed, the GET becomes a matter of process, not panic.
This is where a professional bookkeeping partner becomes invaluable. At Vertaccount, we believe a hawaii small business accountant and bookkeeping partner must be fluent in the language of local business. For our Hawaii clients, accurately tracking and recording all transactions related to the General Excise Tax is a non-negotiable part of our service.
We ensure your chart of accounts is structured correctly, your income streams are properly categorized, and your financial reports give you the clarity you need to run your business with confidence. If you’re ready to move beyond the confusion of GET and achieve true peace of mind with your business finances, the first step is a foundation of professional bookkeeping.
