The state of Hawaii is made up of more than 130 islands and atolls in the Pacific Ocean, over 3,500 kilometers from the southwestern US West Coast. The Aloha State covers almost 28,000 km², but only 16,500 km² of that is land. Hawaii is home to almost 1.5 million people, and its capital is Honolulu.
Aloha Hawaii
Hawaii gives a warm welcome to companies that want to expand or set up on the islands, and it offers generous incentives to do so. Alongside a high quality of life, a multicultural setting, an entrepreneurial and innovative ecosystem and a favorable tax climate, the Aloha State wins people over with business-friendly initiatives and resources from its Department of Business, Economic Development and Tourism.
Hawaii's strong entrepreneurial community means newcomers find a support network of like-minded people who are committed to helping businesses grow and succeed. The state is home to award-winning innovators, modern coworking spaces and programs for growing companies. Hawaii is making big strides in renewable technology and specialty agriculture, and the islands have become an important hub for Asia-Pacific affairs.
Hawaii's tax incentives include property tax exemptions, tax exemptions for goods manufactured for sale outside Hawaii and tax-free stock transfers.
Tourism outshines everything
Tourism has been Hawaii's largest industry since statehood in 1959. It accounts for about a fifth of gross product and brings in more than 16 billion dollars a year. Tourism creates more than 200,000 jobs in Hawaii and generates almost two billion dollars in taxes. The state government has already worked hard to diversify the economy and reduce this dependence.
Other core sectors are services, fishing, education, agriculture and defense. The US military is a major part of Hawaii's economy: the Department of Defense invests around 13 billion dollars a year in the state, making it Hawaii's second-largest industry. The islands are one of the few states that host the Air Force, the Army, the National Guard, the Marines and the Coast Guard. Hawaii is also home to the US Pacific Command. All these installations create jobs and contracts for local businesses. Besides the civilian workforce, around 64,000 active-duty personnel are stationed across the islands. Contractors benefit from military spending on ship repair and on building construction and maintenance.
FDI: here to stay
Hawaii doesn't just draw tourists; it wins over global companies too. Almost 300 international companies have operations in the Aloha State, enriching the local economy. Together they employ almost 40,000 Hawaiians. Less than ten percent of these jobs are in manufacturing. That share is usually much higher, which shows how different Hawaii is. The close ties between Japan and Hawaii also show in FDI: Japanese companies invest more than those of any other nation and account for the most jobs created.
Income tax in Hawaii
Hawaii levies an income tax of 1.4 to 11%, depending on income. On top of that, you pay federal income tax.
Corporate tax in Hawaii
Hawaii levies a graduated corporate income tax of up to 6.4%. On top of that, you pay federal corporate tax.
Sales tax in Hawaii
The USA has no VAT on the European model. Instead, states, counties and municipalities levy a local sales tax on the sale of goods (but not services).
Sales tax rate in Hawaii
Hawaii's sales tax (the General Excise Tax, GET) is 4% at state level. Counties add an average of 0.44%, so the combined rate averages 4.44%.
Hawaii nexus laws & sales tax
Learn more about economic nexus laws and sales tax.
Effective date
July 1, 2018
Included transactions:
Gross income or gross proceeds from tangible personal property, intangibles or services delivered or used in the state
Treatment of exempt sales:
Exempt sales and exempt services count toward the threshold
Trigger:
Sales or transactions
Sales/transaction threshold:
$100,000 or 200 transactions
Evaluation period:
The threshold applies to the current or immediately preceding calendar year. Effective for tax years beginning on or after January 1, 2018.
Additional information:
- Registration requirements: Hawaii requires a remote seller to file its first periodic return by the due date for the period following the one in which it crossed the economic nexus threshold. For details, see Department of Taxation Announcement 18-10.
- Department of Taxation announcement
- HI SB2514
Hawaii marketplace sellers & sales tax
Learn more about registration requirements for marketplace sellers
Effective date for marketplace facilitators:
January 1, 2020
Economic nexus threshold:
At least 200 transactions or $100,000 in gross income from Hawaii sales in the current or previous calendar year. When calculating the threshold:
- Marketplace facilitators should include direct and third-party sales in their thresholds
- Remote sellers should exclude sales through a marketplace, except:
- sales of tangible personal property made through a marketplace but shipped into the state by the marketplace seller, and
- sales of intangible personal property and services in the state that are ultimately used or consumed in the state, whether sold directly or through a facilitator.
Registration requirements:
- Remote multichannel sellers: Once you cross the economic nexus threshold, you must register with the Hawaii Department of Taxation (DOTAX) and collect Hawaii's General Excise Tax (GET) on sales not taxed by a marketplace facilitator.
- Remote marketplace sellers: You must register with DOTAX once you cross the economic nexus threshold, even if you only sell through one or two marketplaces. Contact DOTAX for more information.
- In-state multichannel sellers: You must register and collect Hawaii GET on sales not taxed by a marketplace facilitator.
- In-state marketplace sellers: You must register. Contact DOTAX for more information.
- Please note that marketplace sellers can be held liable for GET in some situations. Learn more here and here.
Find more state profiles in our overview of all US states. Which state is right for your company? Our guide Which US state is best for your company? explains. And how to run a US LLC with no US presence completely tax-free is shown by our sister site zerotax.llc.
How we help with Hawaii:
We guide you through company formation, taxes and visas, even if your destination is Hawaii. It usually starts with a consultation; you'll find the routes to your own company under US Company Formation.