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No Sales Tax in Hawaii, but…

A question was asked on Yahoo Answers by a lady who wanted to know how to figure out exactly how much her room, tours, and groceries would cost her.  She was confused because she saw a figure of 13.42% being used (which I still don’t know what that would have been for), but remembered seeing something about the state sales tax being 4%.  At any rate, I thanked her for her inspiration and this article is the result of my providing her answer.

Hawaii doesn’t have a sales tax!  That’s the good news.

The bad news is, it does have a gross receipts tax, called an Excise Tax.  What’s the difference?  An excise tax is charged on everything.  Goods, services,  and even usually tax-exempt non-profit organizations …everything!   Hmmmm, in retrospect, maybe not having a sales tax isn’t such good news after all.

The state excise tax rate is 4% and the City and County of Honolulu, which encompasses the island of Oahu, has an additional .5% to help fund a future rail transit system.  But, if you look at your sales receipts, you will see that you were probably charged 4.166% or 4.712%, not 4% or 4.5%.

The reason for this discrepancy is a unique one.  Hawaii, as far as I am aware, is the only state which also charges a .5% wholesale tax.  And, since this is permitted to be passed along to the customer as a tax on tax, the “actual excise tax of 4%” becomes the odd 4.166% you are charged or 4.712% on Oahu.

A more familiar tax that people who travel will notice is the room tax.  Given our current economic situation and the fact that all states are looking for additional revenue sources, its a way for them to raise money without raising the ire of locals…re: voters!   Hawaii modified theirs in calling it a “Transient Accommodation tax”, currently 8.125%.

You will also find some additional fees/taxes on your car rental agreement.  There is a $3 per day rental vehicle state surcharge, a customer facility charge of $1/day, and they even pass along a pro-rated share of the vehicle licensing fee (about 25-50 cents per day), and there is an 11.11% Concessionaire Fee Tax (which, when you add in the state excise tax, is 15.277% in total taxes/15.822% on Oahu).  Confusing?  Absolutely!

So, if you get a car rental rate of $31/day, it will total to almost $40/day after all the fees and taxes.  (It could be worse.  I don’t recall exactly where, but I remember being charged a “tire disposal fee” at one place I rented a car.)

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