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STARTING AND OPERATING A BUSINESS IN HAWAII Copyright © 2009, Michael D. Jenkins CHAPTER 18
CONTENTS OF THIS CHAPTER:
I. INTRODUCTION Hawaii, with its spectacular natural beauty, balmy year-round climate and friendly "Aloha spirit" is an exceptionally desirable place to visit, or in which to live or do business. Because of its scenery, near-perfect weather, and outstanding tourist facilities, Hawaii is a major destination for tourists from both the U.S. mainland and Asia -- particularly Japan. The very high level of tourist visitation, generally between 6 and 7 million visitors a year, has proved to be both a bane and a blessing. In good times, it has led to very high levels of investment and employment in the state; when tourism drops off suddenly, as it did during and for several years after the 1990-91 Persian Gulf crisis, while this author was living in Kaneohe, it can have a severe effect on the entire Hawaiian economy. Until very recently, the state's economy was booming, in terms of the level of unemployment, which remains far below the national average, and other economic measures. For example, in January, 2008, the state's unemployment rate was only 3.0%, up from an almost unheard of low level of only 2.2% in late 2006, but as the national recession took hold and tourist visitation dropped sharply in 2008, unemployment in Hawaii soared to 6.1% by January, 2009, although that was still significantly better than a national unemployment rate of 7.6% for that month. While the years 2005 through 2007 were years of exceptional economic growth in Hawaii, with rapid growth in the state's workforce, the honeymoon has definitely ended in 2008 and 2009. To view the latest federal Bureau of Labor Statistics unemployment rate data for Hawaii or any other state, visit the BLS website. Because of its low level of unemployment for several years, and the high taxable wage base on which Hawaii's unemployment taxes were based ($34,000 in 2006, the highest of any state), Hawaii has built up a large surplus in its state unemployment insurance fund. Thus, in 2007, the unemployment tax rate was lowered to 1.9% from 2.4% in 2006, although the wage base increased again with inflation indexing to $35,300. However, a very major cut in the unemployment tax was made in 2008, by both reducing the taxable wage base to only $13,000 and cutting the new employer tax rate further, to 1.7%. Thus, the maximum tax per employee was reduced from $816 in 2006 to $670.70 in 2007 and to only $221 for 2008 and 2009, greatly reducing the tax burden on employers. One limiting factor in Hawaii's business climate is that the state has a relatively high cost of living, with extremely high housing costs, compared to national averages. Taxes are also among the nation's highest, in what is not a wealthy state. The Massachusetts Taxpayers Foundation study of state taxes in 2004 (based on 2002 data) found that Hawaii had the fourth-highest state taxes in the nation, of $120.62 per $1,000 of residents' income. New York had the highest state taxes, at $130.79, and Tennessee the lowest, at just under $84 per $1,000 of income, in comparison. A different (2005) study by the Tax Foundation found that Hawaii, at 11.5%, had the third-highest ratio of state taxes to per capita income of any state in the nation, after Maine (13%) and New York (12%). UPDATE NOTE: A major positive economic factor has been growth in tourism in recent years. Visitor (tourist) counts rose significantly in 2005, breaking all previous records and marking a substantial recovery from the sharp drop-off that was experienced in the early and mid-1990s. Both visitor numbers and spending per visitor increased at very healthy rates in 2005, and remained at high levels in 2006 and 2007, accounting for much of the strength in the state's economy, since tourism is a key segment of the total Hawaiian economy. However, preliminary visitor figures for 2008 indicate a sharp drop of 10% or more in total visitors as well as decreases in per-visitor spending, with declining visitor numbers plummeting in the last part of 2008, with total visitors in December down 16.5% from December, 2007. The 2009 increase in the Transient Accommodations Tax is likely to further depress tourism in Hawaii. Hawaii has a fairly typical tax structure, in general, but the legal system under which businesses must operate is uniquely different from other states, with most of the tax and administrative functions that are typically handled at the local level in other states being centralized at the state level. In addition, most city government functions are instead handled by county governments in Hawaii. For example, the mayor of Honolulu is actually the mayor of all of Honolulu County, which comprises the entire island of Oahu. Each county has a mayor and council, much like the typical city government on the mainland, and fire, police, garbage collection, and similar functions are organized at the county level, rather than the city level. There are only four county governments for the islands: the city and county of Honolulu (Oahu), and the counties of Hawaii (the Big Island), Kauai, and Maui. Maui County includes the islands of Lanai, Molokai, and Kaho'olawe, as well as Maui. The Kauai taxing district includes the island of Niihau. Like most states, Hawaii imposes an income tax, a franchise tax on certain financial corporations, a sales and use tax on business gross receipts, and various excise taxes, with property taxes imposed at the county level. It is one of only a few states that does not impose any property taxes on either tangible personal property or intangible property. II. LEGAL ENTITIES -- FILING FEES AND REPORTING REQUIREMENTS (a) In General. A business that operates in Hawaii can do so as a sole proprietorship, a general or limited partnership, an LLC or LLP, or a corporation. In addition, like the federal tax law, the state income tax law recognizes S corporations, for income tax purposes, and typically allows the income or losses of an S corporation to "flow through" and be taxed or deducted at the shareholder level, rather than taxing the corporation itself as an entity. Each of the above entities is discussed below, along with the basic requirements for forming such an entity and any general ongoing (non-tax) reporting requirements that are applicable to it. The tax treatment of each form of legal entity is discussed in Section IV below. IMPORTANT NOTE: (b) Sole Proprietorships. In general, sole proprietorships in Hawaii can be established with no formalities. However, as discussed in Section IV(b), it will generally be necessary to obtain a state business license from the Department of Commerce and Consumer Affairs, plus you may need one or more county business licenses from counties in which you operate and, in some cases, special state licenses, as well. Every sole proprietorship or other business should also immediately register for the General Excise Tax (GET) as well with the Hawaii Department of Taxation. See the address information for those agencies listed in Section VI(a). No separate income tax form filing is required, generally, for a sole proprietorship, under the Hawaii income tax law. Instead, as with the Schedule C on your federal Form 1040, you simply report the net income or loss from your sole proprietorship on your state personal income tax return. See Section IV(c) for information on the Hawaii income tax and filing requirements for individuals. Doing business as a sole proprietor in Hawaii is generally much simpler than operating as any other kind of business legal entity. As a sole proprietor, if you have no employees, you are not required to pay any unemployment taxes, withhold any federal or state income tax from wages, or obtain workers' compensation coverage for yourself. (c) Partnerships. Hawaii's partnership laws allow creation of either a general partnership, in which all partners are liable for the debts of the business, or a limited partnership, in which only the general partners are liable for debts, while the liability of limited partners is limited to the amount they have invested, in general. State law also allows for the creation of a limited liability partnership, in which no partner has personal liability (subject to certain exceptions). As discussed in Section IV(b), it may also be necessary to obtain one or more local business licenses from counties in which you operate and, in some cases, state licenses, for any type of partnership, including general or limited partnerships, or limited liability partnerships. Partnerships, as entities, are not subject to state income tax in Hawaii. Instead, the income or losses of the partnership, as allocated among the partners, must be reported on the personal income tax returns of the individual partners (or on the corporate tax returns of any corporate partners). Partnerships are required to file an annual tax information return with the state. For details on Hawaii partnership tax return filing requirements, see Section IV(c). A partnership agreement, for any type of partnership, should spell out in considerable detail such matters as the following:
As a rule, general partnerships in Hawaii can be formed with few formalities, although it is highly advisable to have a written partnership agreement. A partnership must register on Form GP-1 with the Department of Commerce and Consumer Affairs, however, and pay a small registration fee of $15 for a general partnership, plus file an annual statement with a $5 fee. The same fees apply, whether the general partnership was formed in Hawaii or is a foreign partnership. Also, it may also be necessary to obtain one or more local business licenses from counties in which you operate and, in some cases, state licenses, for the partnership. A limited partnership, in which there is at least one general partner (who is liable for partnership debts) and at least one limited partner (who is not liable for partnership debts), may also be formed under Hawaii law. Unlike general partnerships, a limited partnership must generally have a written partnership agreement, and must also file a certificate of limited partnership with the Hawaii Department of Commerce and Consumer Affairs, paying a $25 filing fee, or $50 to register a foreign (out-of-state) limited partnership. Limited partnerships are also required to file an annual statement with the Department of Commerce and Consumer Affairs and pay a $5 filing fee. Hawaii's partnership laws, like those of several other states, allow a limited partnership to elect to become an LLP as well, or a limited liability limited partnership (LLLP). For information on limited partnership filing requirements, see the contact information for the offices of Department of Commerce and Consumer Affairs, listed in Section VI(a). Also, it may also be necessary to obtain one or more local business licenses from counties in which you operate and, in some cases, state licenses, for the partnership. LIMITED LIABILITY PARTNERSHIPS Limited liability partnerships (LLP's) are a relatively new form of partnership permitted under the laws of Hawaii. Somewhat like an LLC, an LLP provides a degree of limited liability for its owners, while retaining the tax advantages of a partnership for federal and Hawaii state income tax purposes. However, unlike an LLC, an LLP typically operates like a regular partnership, and is not required to file articles of organization. Partners in a general partnership can obtain a significant degree of limited liability by simply registering the partnership with the state as an LLP. To form an LLP in Hawaii, you must register your general or limited partnership with the Department of Commerce and Consumer Affairs by filing Form LLP-1, Statement of Qualification, and paying a filing fee of $25. An LLP that is a general partnership must also file Form GP-1; if it is a limited partnership, it must file Form LP-1. Foreign LLP's, those created under the laws of another state, must also register with the Department of Commerce and Consumer Affairs by filing Form FLLP-1, Statement of Foreign Qualification, and paying the applicable filing fee, which is $50. Annual statements must be filed by all LLP's, along with annual filing fees of $15. LLP's operating in Hawaii were formerly required to meet certain financial responsibility requirements, either by maintaining adequate liability insurance. However, like most other states, Hawaii has adopted the Revised Uniform Partnership Act and has repealed the foregoing insurance and financial responsibility requirements for LLP's. For more information on LLP registration and reporting requirements, see the contact information for the offices of the Department of Commerce and Consumer Affairs, listed in Section VI(a). Also, it may also be necessary to obtain one or more local business licenses from counties in which you operate and, in some cases, state licenses, for the partnership. Note that one potential drawback of LLP's, if you will do business in other states besides Hawaii, is that some states, like California and New York, only recognize certain types of professional partnerships as LLP's. If yours is not a professional partnership, such other states may simply treat your LLP like an ordinary general partnership, with no limitation of liability. (d) Corporations. To form a corporation in Hawaii, you must file articles of incorporation with the Hawaii Department of Commerce and Consumer Affairs and pay a fee of $50. A foreign corporation (one formed under the laws of another state or a foreign country), must obtain a certificate of authority before it may legally conduct business in Hawaii, by filing an application for a certificate of authority and paying a filing fee of $50. In addition, once your corporation is formed, it will be required to file annual reports and pay a filing fee of $15 with the Department of Commerce and Consumer Affairs each year. Failure to file this report on a timely basis could result in suspension or revocation of your corporation's charter. In addition to paying federal income taxes on its income, a corporation that does business in Hawaii must also file corporate income tax returns with the state. See Section IV(c) for a discussion of state corporate income tax rates and tax return filing requirements. There is no general corporate franchise tax in Hawaii, unlike many other states. However, there is a franchise tax on banks, savings and loans, small business investment companies (SBICs), and other types of financial corporations. For tax forms and more information on corporate income and franchise taxes in Hawaii, see the contact information for the offices of the Department of Taxation, listed in Section VI(a). For more information on filing articles of incorporation or applying for a certificate of authority to do business in Hawaii, see the contact information for the offices of the Department of Commerce and Consumer Affairs, listed in Section VI(a). (e) S Corporations. An S corporation is simply a regular corporation that has elected, for federal or state income tax purposes, or for both, to be taxed somewhat like a partnership, with its income, losses and tax credits flowing through to its owners, who report such income, losses, or credits on their individual tax returns. Hawaii recognizes S corporations for income tax purposes, and treats them in a manner similar to the federal tax treatment, provided a federal S corporation election is in effect. (f) Limited Liability Companies. Hawaii, like all other states, has enacted a limited liability company (LLC) law, which was effective as of April 1, 1997. Hawaii was the last state in the union to authorize the formation of LLC's. Thus, in addition to the traditional choices of a sole proprietorship, partnership, or corporation, a business that operates in Hawaii may now also choose to operate in the form of an LLC. In most states, including Hawaii, LLC's are very attractive entities for many small businesses, in that they offer the same protection as a corporation from creditors for debts of the business, while offering much of the flexibility plus the flow-through tax treatment of a partnership for federal and state income tax purposes. See Section IV(c) for a discussion of the income tax treatment of LLC's under Hawaii tax laws. To form an LLC under the laws of Hawaii, you must file articles of organization by filing Form LLC-1, Articles of Organization for Limited Liability Company with the Department of Commerce and Consumer Affairs and paying a $50 fee. While state law formerly required that an LLC have at least two members, this requirement was repealed as of March 31, 1997. Foreign LLC's, those formed under the laws of another state, must obtain a certificate of authority to do business in Hawaii, by filing Form FLLC-1, Application for Certificate of Authority, with the Department of Commerce and Consumer Affairs and paying a $50 fee. All LLC's must file annual reports, together with a filing fee of $15. For more information on filing articles of organization for an LLC, see the contact information for the offices of the Department of Commerce and Consumer Affairs, in Section VI(a). (a) In General. When acquiring an existing business, there are a number of state legal and tax issues you or, preferably, your business attorney, should attend to before closing the purchase. These include matters such as doing a title search for any real property that is being acquired, checking for any recorded security interests on personal property items, and thoroughly researching county, state, and federal records for any judgment liens, tax liens, or other liens, before property is acquired. You will also benefit from consulting a tax advisor before the agreement of sale is negotiated, in order to seek a structuring of the agreement so that the purchase price is allocated among the assets in a way that favors you. You may be able to obtain considerable tax savings if the purchase price is allocated in a way that gives you the best possible tax results under federal and state income tax laws, and other state tax laws, such as general excise tax or property tax laws. Depending upon the state (or states) in which the seller's assets are located, you may also have to comply with state bulk sale or bulk transfer laws. You should also obtain tax releases from various state taxing agencies, as discussed below. (b) Bulk Sale Laws. Typical bulk sale laws require either publication of legal notices to all creditors in advance of the sale and recording of such notices in some cases, or maintenance of detailed lists of the property to be transferred, for inspection by the public. Hawaii is one of the states that has repealed its bulk sale law, in 1998. Thus, you no longer need to comply with that complex law when you purchase assets of an existing business. Despite the repeal of the Hawaii bulk sales law, the seller must still report a bulk sale on Form G-8A to the Hawaii Department of Taxation within ten days after the transfer. As the purchaser, you need to withhold payment until you receive a tax clearance certificate for the general excise tax (GET) or you will become liable for the seller's unpaid GET and any interest or penalties. See Section III(c) for more information on obtaining tax clearances. Note that a bulk sale of inventory subjects the seller to GET on the transaction at the wholesale tax rate of 0.5%, and that sale of a covenant not to compete is taxable at the rate of 4% (plus 0.5% surcharge, in Honolulu county), while a sale of "goodwill" is not taxable. (c) Tax Releases. When you acquire an existing business, you will want to make sure that you do not unwittingly become liable for any unpaid taxes owed by the seller. Typically, to protect yourself, you will need to receive a tax release or releases from various state taxing agencies, for such taxes as sales and use tax, income tax withholding, and state unemployment taxes, in each state in which the seller does business. If you fail to obtain such a release or written statement from the tax agency that the seller is not delinquent on any tax payments, you will be held responsible for such tax if it is not withheld from the purchase price proceeds and paid to the state at the time the sale of the business transpires. In Hawaii, you should have the seller obtain a tax clearance certificate by filing Form A-6, Application for Tax Clearance, with the Hawaii Department of Taxation, for various state taxes the seller might owe, including income tax withholding, GET, income tax, transient accommodations tax, and other miscellaneous taxes. Tax releases are now issued cooperatively by both the IRS, and the state of Hawaii, and are valid for 6 months after the date issued. The IRS will certify the tax clearance form only if the clearance is sought in connection with a city, county, or state government contract in Hawaii or in connection with issuance, renewal, or transfer of a liquor license. (d) Unemployment Tax Rating of Seller. In addition to obtaining tax releases, you may find it advantageous to succeed to the seller's unemployment tax experience rating, if the seller has a tax rate lower than you would otherwise obtain as a new business. To obtain the seller's favorable experience rating as a successor employer, you will need to apply within 60 days after acquiring the seller's business on Form UC-86, requesting that you be treated as a successor employer. To be eligible, the seller must pay all unemployment taxes it owes up to its date of termination within the same 60-day period and must also file a waiver, by also signing the Form UC-86, relinquishing its rights to the experience record. In addition, your business must acquire all or nearly all of the business and employees of the seller. PLANNING POINT: EXAMPLE: (e) Withholding Tax on Real Estate Purchases. In Hawaii, if you acquire real property from a seller who is a nonresident, you must generally withhold state income tax at a rate of 5% of the amount realized by the seller and pay it over to the state within 20 days. To avoid having to withhold the Hawaii tax, you must receive an affidavit from the seller that states that:
IV. HAWAII TAXES AND OTHER GENERAL REQUIREMENTS (a) In General.
Hawaii's tax system is relatively similar to that found
in most other states, despite its being named a "tax hell"
in a major financial magazine survey several years ago.
Tax rates in Hawaii are fairly high, up to 8.25% on
individuals in 2009,
and while the state equivalent of a sales tax (the General
Excise Tax -- GET) is quite low at 4% and there are no
local sales taxes, except a 1/2% GET surcharge on Oahu,
the GET applies to virtually every type of business income,
including all kinds of services and rentals, such as rental
of residences.
On the other hand, corporate tax rates are fairly low, at
a maximum rate of 6.4%,
and there is no personal property tax of any kind in
Hawaii, on either tangible or intangible property.
Hawaii has indicated that it will not conform to recent
federal tax enactments that increased the Section 179
expensing deduction for equipment to $125,000 for the
years 2007-2010.
For state tax forms and tax information, see the contact
information for the Department of Taxation in
Section VI(a).
(b) State and Local Licensing.
Nearly any business, operated anywhere in the United States, will
have to have at least one government license of some kind. In
Hawaii, you will need to register for a state license with the
Department of Commerce and Consumer Affairs, and you will also
need a local license, issued by the Department of Finance of
your county. Before you open your business, contact your local
county offices (see addresses listed in Section VI(a))
and find out if your particular business needs one or more local
licenses. Most kinds of local business licenses are granted
upon simple payment of a fee, with no further requirements.
However, if you are engaging in any kind of food business,
you will usually need to also obtain a health department
permit and show that you are in compliance with health
department food-handling requirements. In addition, be
sure to check with an attorney or local government zoning
or planning department officials to determine if your
business will be in compliance with all local zoning and
planning restrictions. If you own or rent any type of
facility, you will generally need fire department permits,
showing that you meet fire safety codes and any construction
or improvements to an existing structure will usually
require a building permit. If you intend to simply operate
your business from your home, you may be in violation of
local zoning requirements, but this is less likely to be a
concern if you don't have clients, customers, suppliers, or
employees coming to your house on business, on a regular
basis.
State governments have traditionally required special
licenses for many kinds of professionals, such as physicians,
dentists, lawyers, and accountants. To further protect
consumers, Hawaii has expanded the list of occupations
that must be licensed by the state to include many other
occupations. Most state licenses not only require payment
of fees, but are only issued for a given profession or
occupation upon showing that you have completed certain
educational or experience requirements, or passed certain
tests, or some combination of the foregoing.
In addition to specific professional or occupational
licenses that may be required for your business, nearly
every business in Hawaii must register with the state
and pay some type of business registration fee, with
the exception of a sole proprietorship that does not
operate under a fictitious or assumed business name.
See Section II(c) for registration
fees for partnerships; Section II(d)
for corporations, or Section II(f)
for limited liability companies (LLC's).
For information on state licensing and business
registration requirements in Hawaii, see the contact
information for the Business Registration Division of
the Hawaii Department of Commerce and Consumer Affairs,
listed in Section VI(a). Or
contact one of the Business Action Centers that are now
located on Oahu, Maui, and the Big Island, at the addresses
listed in Section VI(a), for
assistance.
You should also check with your city or county
government for any local licenses or permits that may
be required for your business, although Hawaii has
greatly reduced such licensing requirements in recent
years by moving most many local requirements to the
state level.
(c) Income and Franchise Taxes.
Hawaii has both an individual income tax and a corporate income
tax, as well as a franchise tax on banks and certain other
financial corporations.
TAXATION OF SOLE PROPRIETORS AND PARTNERSHIPS
Before 1999, the Hawaii individual income tax was imposed
at a maximum tax rate of 10%. Under tax cut legislation, the
top rate on income was reduced in several steps to a top
rate of 8.25% that has applied since 2002. However, for the
years 2009 through 2015, three new, higher tax brackets have
been added, of 9% for taxable income over $300,000, 10% on
taxable income over $350,000, and 11% on incomes over $400,000,
for married couples filing joint returns. (Brackets are half
the above amounts for single filers and 3/4 of the above amounts
for heads of households.) The new 11% bracket is now the highest
state income tax rate in the United States.
Individual taxpayers generally pay state income tax on
their business earnings from a sole proprietorship, or on
their share of the earnings of a pass-through entity, such
as a partnership or S corporation. The Hawaii personal
income tax return is Form N-11, which must
be filed with the Department of Taxation on April 20th for
the preceding taxable year. Some full-year residents may
be allowed to file a simplified return, Form N-13.
Beginning with the 2007 tax year, for returns due in 2008,
Form N-12, which some taxpayers were
previously allowed to file instead of the N-11,
has been discontinued.
Partnerships are not subject to state income taxation
in Hawaii, but must file an information return with the
Department of Taxation each year, showing each partner's
share of taxable income, losses, and credits, on Form
N-20. As an individual partner, you report your
share of income or loss on Schedule E of your Hawaii personal
income tax return. LLP's, like other partnerships, are not taxed.
Partnerships (and LLC's treated as partnerships) are not
required to withhold Hawaii income tax with regard to nonresident
owners (partners or members), but a partnership or LLC may,
if it chooses, file a composite tax return on behalf of its
nonresident owners, as a convenience, if certain requirements
are met, such as only including individual owners whose only
Hawaii-source income is from that entity.
Individual taxpayers doing business as sole proprietors
(or who are partners in partnerships, members of LLC's, or
shareholders in S corporations), who have taxable income from
the business, will generally be required to make advance
payments of estimated Hawaii individual income taxes, on
Form N-1 in most cases, if their tax liability
is not covered by withholding. No declaration is required if
the total estimated tax liability for the year is less than $500.
Estimated tax payments are due in four installments, on
the 20th day of the 4th, 6th, and 9th months of the taxable
year, and the 20th day of the first month of the following
year.
To avoid penalties for underpayment of estimated tax, you
must either pay in 60% of the current year's tax, or 100%
of the previous year's tax.
The Hawaii corporate income tax rate, on corporations
other than S corporations, is a graduated tax of 4.4% on the
first $25,000 of income, 5.4% on the next $75,000, and 6.4%
on income over $100,000. If a corporation has only limited
business activity in the state -- sales only, no real estate
owned or rented, no tangible property owned in the state,
and gross sales in Hawaii of not over $100,000 -- it may
instead elect to pay a flat tax of 0.5% of gross sales, in
lieu of the regular corporate income tax.
The state corporation income tax return is Form N-30,
which must be filed with the Hawaii Department of Taxation by
the 20th day of the fourth month following the end of the
taxable year, or by April 20th in the case of a corporation
whose taxable year is the calendar year.
Corporations are required to make estimated tax payments
of their state corporate income tax in advance, if their tax
liability for the year equals or exceeds $500.
If your business is a foreign corporation, you may be
excused from filing any estimated tax if the Department
of Taxation is satisfied that less than 15% of your
corporation's income is attributable to Hawaii.
Corporate estimated tax payments are due in advance, on
Form N-3, in four equal installments, on the
20th day of the 4th, 6th, and 9th months of the taxable year
and the first month of the following taxable year.
Penalties will be imposed for failure to make the required
estimated tax payments on a timely basis. However, if the
preceding year was a full year of 12 months, the current
year payments need only be equal to 100% of the prior
year's tax liability.
Like the federal tax law, Hawaii's tax law generally
exempts S corporations from tax, except on any income that
is taxable to the corporation for federal tax purposes.
However, S corporations are required to file annual
information returns, reporting their Hawaii-source income
that is taxable to each of the shareholders.
Nonresident shareholders of an S corporation must file
agreements with the state to be subject to Hawaii income
tax on their share of the Hawaii-source income of the
S corporation. If any nonresident fails to do so, the
corporation is required to withhold state income tax at
the maximum tax rate on that shareholder's income and pay
the tax on his or her behalf. An S corporation with more
than one nonresident shareholder may file a composite
return and pay the taxes for all of the nonresidents on
their distributable share of the Hawaii-source income of
the S corporation.
TAXATION OF LIMITED LIABILITY COMPANIES
Limited liability companies (LLC's) operating in Hawaii will
generally be subject to the same tax rules as partnerships.
LLC's treated as partnerships are not required to withhold
Hawaii income tax with regard to nonresident members, but an
LLC may, if it chooses, file a composite tax return on behalf of
its nonresident members, as a convenience, if certain requirements
are met, such as only including members whose only Hawaii-source
income is from that LLC and who are individuals.
Under recent amendments to the state's LLC law, one-member
LLC's are now authorized, which means they can be treated as
sole proprietorships for federal, and presumably Hawaii,
income tax laws.
It is not always entirely clear whether or not an LLC is a
"single-member LLC," where the "single owner" is a married couple
who hold the entire ownership of the LLC in some form of co-tenancy,
such as joint tenants with right of survivorship, tenants by the
entirety, or as tenants in common. The federal Internal Revenue
Service (IRS) has taken a very lenient position in Rev. Proc.
2002-69, where a couple hold the LLC interest as community
property, ruling that the IRS will accept whatever choice they
make, either to disregard the LLC as an entity (treating it as a
"single-member LLC") or to treat it as a partnership between the
husband and wife.
However, Hawaii is not a community property state, so where
the LLC is owned by a husband and wife in some form of co-tenancy,
it is unclear whether the IRS treatment would be as lenient as
for community property owners, since the IRS has not issued any
published rulings on whether an LLC can be a disregarded entity
if held in one of the various forms of co-tenancy by a married
couple, rather than being held as community property. Thus, it
is also unclear, where an LLC is owned by a husband and wife as
co-tenants, whether Hawaii would treat the LLC as a single-member
LLC or as a partnership.
(d) Sales and Use (General Excise) Tax.
Hawaii does not have a typical sales and use tax. Instead,
it imposes a general excise tax (GET). The GET is like a
broader form of sales tax that applies not only to retail
sales of tangible personal property, but also to all kinds
of services, real estate rentals, and other types of income,
at the statewide rate of 4% (before 2007). There were no
local GET taxes before 2007, although counties are allowed
to adopt such local taxes, at up to a 0.5% tax rate. Tax
legislation in 2005 allowed counties to adopt a 0.5% GET
surcharge (local tax) to fund mass transit and road repairs,
but such new taxes could not go into effect until January 1,
2007. Counties were required to adopt such a surcharge, if at
all, no later than December 31, 2005. Only Honolulu County
(the island of Oahu) did so. Thus the Honolulu 0.5% surcharge,
which increased the GET rate to 4.5% in Honolulu County, went
into effect on January 1, 2007.
The Hawaii Department of Taxation has issued new
Administrative Rules for businesses that operate both
in Honolulu County (where the 0.5% GET surcharge is in
effect) and in other parts of the state. These new rules
require such businesses to allocate part of their sales to
Honolulu County (at the higher GET tax rate), using any
reasonable method of allocation, except that certain
types of revenues must be allocated to a particular
county, including:
The Department of Taxation has also issued guidance for
county surcharge source rules with regard to property
management services. The rule is that property management
fees are to be allocated to the county where the property
in question is located, rather than attempting to determine
where the services are rendered.
Unlike most sales taxes, the GET is imposed directly on
the seller, and not merely collected from the buyer. Thus
if, as a seller, you add GET at 4% (or 4.5%) to an item you
sell, you must also pay tax on the tax you have added on.
The GET is imposed on the gross receipts of the seller,
but the tax is expressed as a percent of the price on the
purchaser's bill. Because the gross receipts include tax
that is passed on to the purchaser, the tax rate expressed
as a percent of the price is greater than the statutory
rate on gross receipts. Since a seller is prohibited from
visibly collecting more than the amount actually owed, the
seller can choose to pass on to purchasers 4.416% (4.712%
where the tax rate is 4.5%, in Honolulu County) of the cost
to cover the optimum amount of the general excise and surcharge
tax expense; to pass on to purchasers 4% (or 4.5% in Honolulu
County) of the cost to cover the general excise and surcharge
tax expense; or may choose not to pass on to purchasers the
general excise tax expense at all.
Not all gross receipts are subject to the GET or its
companion use tax. Exemptions include the following:
Reduced rates of 0.5% apply to certain taxpayers, such
as manufacturers and wholesalers, and a rate of 0.15%
applies to insurance solicitors' income. Insurance companies
are exempted from the GET.
Sellers are required to obtain a GET license and to
pay over the GET to the Department of Taxation. You
should register on form BB-1, State of Hawaii Basic
Business Application, which must be submitted with
a one-time GET license fee of $20, plus any other applicable
fees. This form also serves as a registration for the
Transient Accommodations Tax and the Rental Motor Vehicle
and Tour Vehicle Surcharge Tax, as well as registration for
your state identification number as an employer, for state
income tax withholding purposes, and for state unemployment
tax.
If you are a wholesaler or retailer who purchases goods
that you will resell, your purchase of such goods may qualify
as a sale for resale. Similarly, should you sell goods to
wholesalers or retailers for resale by them, your sale may
also qualify as a sale for resale. Unlike all other states,
which exempt a sale for resale from tax, Hawaii merely
reduces the tax rate from 4% (or 4.5%) to 0.5% where the
sale is made to a buyer who will resell at retail (but no
tax applies if the buyer will resell at wholesale). In any
sale made for resale, the exemption or reduced rate is
ordinarily available only if the purchaser gives the seller
a valid resale certificate, certifying that the items are
being purchased for resale, and not for use or consumption
by the buyer.
In the past, there had been a pyramiding of GET at the
4% rate on many service transactions, where a buyer paid
the tax on purchases and then passed the increased cost
onto its retail customers, which increase was once again
subject to GET at the full 4% rate. However, since January
1, 2000, this pyramiding effect has been reduced each year
until 2006 on many service transactions, by treating those
transactions in a manner similar to the wholesale sales of
tangible personal property. To qualify for the reduced rate, the
property sold or the service rendered must become an "identifiable
element" of the service, property, contracting, or transient
accommodations that will be resold to the purchaser's customers
at the full tax rate. As of 2006, the tax rate on such
"identifiable elements" of services for resale has been
reduced to the wholesale rate of 0.5%.
A shadow tax, the use tax, is also imposed at the same
rate as the GET. It is primarily intended to tax property
that is acquired from sources outside of the state, in
transactions not subject to the GET, when such property
is used or consumed within Hawaii. However, the use tax
is reduced to 0.5% on items that are imported for purposes
of resale. Use tax may also apply to items purchased for
purposes of resale, if such items end up being used or
consumed, instead of being resold. Note that the Hawaii
Supreme Court has upheld the use tax on out of state
companies that merely mail catalogs to residents of Hawaii,
in a 1997 case. [In the Matter of American Express
Travel Related Services Co., Inc., No. 3089, Jan.
23, 1997]
Hawaii enacted the Hawaii Internet Tax Freedom Act, a
law which prohibits the imposition of any discriminatory
tax on electronic commerce or Internet access, for the
years 2000 through 2005. This exemption included the GET,
according to Hawaii Department of Taxation Announcement
No. 99-26, dated August 6, 1999. Note that this exemption
expired on January 1, 2006, and has not been renewed. It was
repealed by the legislature in 2007.
(While Congress renewed the federal Internet Tax Freedom Act,
which generally prohibits states from taxing Internet access
until November 1, 2014, some states, including Hawaii, were
"grandfathered" (exempted) since they already taxed such
services before the initial federal moratorium.)
For more information on Hawaii sales and use tax registration
and compliance, see contact information for the offices of
the Hawaii Department of Taxation in Section VI(a).
(e) Real and Personal Property Taxes.
In Hawaii, as in every other state, any business (or non-business)
real estate you own will be subject to real property taxes. In
general, there is little that you must do, unless you wish to
challenge your assessed valuation, since the county assessor
will bill you for each year's property taxes as they come due.
Hawaii, unlike most other states, does not impose any
property taxes on personal property, either tangible or
intangible. ("Personal property" is any kind of property
that is not real estate.)
(f) Other Business Taxes.
Hawaii imposes a number of excise and other taxes on businesses,
including:
(g) Trade Names. A trade name, also known as a fictitious or assumed name, is any name used in the course of business that does not include the actual legal names of all the owners of the business. Thus, if your business goes by any name other than your own real name, it is operating under a trade name. The same is true of a corporation, if it operates under a name other than its legal name. A trade name might also be one that suggests the existence of additional owners, by using such words as "company," "associates," or "group." In most states where you do business, it will be necessary to register a trade, fictitious, or assumed name, so that people who do business with you can find out who the actual owners of your business are. You may also want to register any such trade name, as a means of protecting against other companies usurping that particular trade name. Businesses operating in Hawaii under a fictitious name should register the name as a trade name with the Hawaii Department of Commerce and Consumer Affairs because registration gives some protection against use of the name by competitors. To register a trade name, file an application with the Hawaii Department of Commerce and Consumer Affairs and a declaration that you are the sole and original owner or assignee of the name. There is a $50 fee for registering a trade name or to renew the registration every 5 years. V. EMPLOYER REQUIREMENTS IF YOU HAVE EMPLOYEES (a) Employer Registration and Withholding. If you have any employees, you will already be withholding federal income tax and FICA taxes from their wages. In addition, since Hawaii imposes a state income tax on wages of individuals, you will need to also withhold Hawaii income tax from the wages of your employees. Before you begin to pay wages, you must register as an employer with the Department of Taxation on Form BB-1, State of Hawaii Basic Business Application, which will also serve as your registration for the general excise tax, unemployment tax, transient accommodations tax, rental vehicle tax, and other state taxes. Effective since January, 2006, Hawaii has introduced a new Form HW-14 periodic Hawaii income tax withholding return that employers must now use. For more information on Hawaii income tax withholding and registration requirements for employers, see the contact information for the offices of the Hawaii Department of Taxation, listed in Section VI(a). (b) Unemployment and Other State Payroll Taxes. If your business has one or more employees, you, as an employer, will be required to pay state unemployment tax based on the amount of such wages paid. Employers subject to the Hawaii unemployment tax must register within 20 days after first hiring employees on Form UC-1, Report to Determine Liability under the Hawaii Employment Security Law, to obtain an employer identification number for unemployment tax purposes. (This form is now part of Form BB-1, State of Hawaii Basic Business Application.) New employers are required to pay tax at a rate of 1.7% in 2009 on the first $13,000 of wages paid to each employee. After you have had employees for a while, you will develop an unemployment tax experience rating. This rating is based on the number of employees you terminate who then claim unemployment benefits and the amount of such benefits paid to those former employees, under a complex formula. The state will inform you when they have assigned you an individual tax rate based on your firm's experience rating. That rate may be higher or, if you have had relatively few benefit claims charged to your account, lower than the standard new employer tax rate you initially were paying. UPDATE NOTE: All state unemployment taxes are imposed upon you as the employer, and, under Hawaii law, cannot be charged to your employees or withheld from their wages. Unemployment tax does not apply to amounts earned by a sole proprietor or the owner of a single-member LLC, or by a partner in a partnership or member of an LLC. Also exempt are wages paid by a sole proprietor or a single-member LLC to children under the age of 21, or to a parent or spouse of the owner. Hawaii's unemployment tax law also allows certain family-owned corporations to apply for exemption for wages paid by the corporation to family members (to a maximum of two family employees per family). CAUTION: All employers subject to the state unemployment tax must a post an unemployment tax notice in the workplace. The Department of Labor and Industrial Relations now provides (free) a single poster for employers that satisfies all the posting requirements under Hawaii's labor laws, including unemployment tax, workers' compensation, minimum wage/hour, and other state labor laws that require posting of notices to employees. For more information on your Hawaii unemployment tax obligations as an employer, see the contact information for the offices of the Unemployment Insurance Division of the Hawaii Department of Labor and Industrial Relations, listed in Section VI(a). (c) Workers' Compensation and Other Mandated Employee Insurance Coverage. While Hawaii, like nearly every state, requires employers to carry workers' compensation insurance or to self-insure for such coverage, Hawaii also mandates that employers provide medical coverage (Prepaid Health Care law) and disability coverage (Temporary Disability Insurance law). Each of these three types of mandated insurance coverage for your employees is discussed below. (1) Workers' Compensation. Workers' compensation insurance is a state-mandated insurance requirement for most employers, in almost every state. In Hawaii, virtually all businesses with one or more employees are required by law to have workers' compensation insurance, except those able to self-insure. Note, however, that a sole proprietor or a partner in a partnership is generally not considered an employee, and a 50% shareholder-employee of a corporation is also exempted. An unpaid officer of a corporation who owns at least 25% of the stock of the corporation is also exempt from coverage. Failure to obtain such coverage can result in severe monetary penalties or, if you are in default for 30 days or more, an injunction from carrying on your business until the default is cured. Real estate salespersons or real estate brokers are not considered employees if all services they perform are for remuneration that is solely based upon commissions earned. Workers' compensation provides wage loss and medical benefits to employees injured on the job and it protects you, as an employer, from legal action for damages for injuries or job-related illnesses suffered by your employees. In effect, it is a "no-fault" insurance system for work-related injuries or illnesses. Thus, if you fail to obtain required workers' compensation insurance, and an employee is injured on the job, you will have opened yourself to unlimited liability and severe legal consequences, so it is very important to obtain workers' compensation insurance for your employees. Be aware that neither general liability nor health and accident insurance can properly substitute for workers' compensation insurance. As an employer, you must complete Form WC-1, Claim for Industrial Injury, as soon as you have knowledge of a disability of a worker, and must post a notice in the workplace informing your employees of their workers' compensation coverage. (2) Prepaid Health Care Insurance (PHC). In addition to workers' compensation insurance, employers in Hawaii must provide both Prepaid Health Care insurance (PHC) and Temporary Disability Insurance (TDI) coverage for most of their employees, to provide for their medical expenses and a partial wage replacement while they are unable to work. Hawaii requires employers to provide medical coverage for their employees, in one of three ways:
Most employees are covered, except workers employed for less than 20 hours a week, agricultural seasonal workers, insurance and real estate salespersons paid solely by commission, anyone covered as a dependent under another qualified health care plan, and certain family members. Coverage commences after an employee has worked for you for four weeks. The Disability Compensation Division of the Hawaii Department of Labor and Industrial Relations will send you a Form HC-4 questionnaire when you register your business, which will ask you a number of questions about your health care coverage, which you must answer and return. Employers can pay the full cost of coverage, or can require employees to share part of the cost, not to exceed one-half the premium cost or 1.5% of the employee's wages. In certain "hardship" cases, the state will help defray the cost of coverage for small employers with fewer than eight covered employees, if the employer's cost exceeds 1.5% of wages and if such excess amounts to more than five percent of the employer's income before taxes from the business. (3) Temporary Disability Insurance (TDI). The TDI law of Hawaii requires employers to provide temporary disability insurance or sick leave benefits for employees who are unable to work because of a disability, for up to 26 weeks of disability, generally. You can meet your TDI obligations in one of three ways:
Workers do not become eligible for TDI coverage unless they work at least 20 hours a week for at least 14 weeks and earn wages of at least $400 during the four most recently completed calendar quarters. Note that you may require your covered employees to pay up to one-half of the premium cost, but not more than 0.5% of the worker's weekly taxable wages, and not on a wage amount that is more than 1/52 the statewide average annual wage, as determined annually by the Department of Labor and Industrial Relations (currently about $400 a week). For more detailed information regarding your obligations as an employer under the Hawaii workers' compensation, PHC, and TDI laws, contact your insurance carrier or see the contact information for the offices of the Disability Compensation Division of the Hawaii Department of Labor and Industrial Relations, listed in Section VI(a). You can also pick up an employer's packet that includes information on the above types of coverage and other labor issues from the Information Office of the Department of Labor and Industrial Relations. It includes a number of official posters you must post in the workplace and various informational pamphlets on workers' compensation, PHC, TDI, and other employer obligations. (d) State Wage and Hour Laws. Some employees of certain small firms not engaged in interstate commerce are not covered by the federal minimum wage and overtime laws. However, even if few or none of your employees are covered by the federal wage-hour laws, because your firm does less than $500,000 a year in gross sales and the employees in question are not deemed to "...engage in (interstate) commerce...," they will still generally be subject to the Hawaii wage-hour laws, which provide for a state minimum hourly wage that was $6.75 an hour in 2006, and which has been $7.25 an hour since January 1, 2007. Hawaii state law, like the federal, generally requires payment at a rate of time-and-a-half for overtime hours worked, in excess of 40 hours a week. Under the Hawaii minimum wage and overtime laws, certain types of employees are not covered, including anyone employed in a bona fide executive, administrative, supervisory, or professional capacity or in the capacity of outside salesperson or as an outside collector. IMPORTANT NOTE: Besides the federal wage-hour posters that you must display in the workplace, you must also display a state wage-hour poster, which you can obtain from the Hawaii Department of Labor and Industrial Relations. In addition to wage-hour laws, most businesses are subject to federal child labor laws, which put numerous restrictions on the working hours and kinds of work in which minors under the age of 18 may engage, and your business must also be cognizant of similar state child labor laws, in Hawaii. In general, while the Hawaii law regulates the employment of children under 18, and requires work certificates to be obtained from the Hawaii Department of Labor and Industrial Relations, no restrictions on working hours apply to 16- or 17-year-old minors under state law, except that they may not work during hours when school is in session, except when not legally required to be in attendance or when excused by school authorities from attending. No minor under age 18 can be hired without a youth employment certificate, which the employer must keep on file and must return to the Department of Labor when the minor's employment terminates. There are considerably more restrictions on hiring 14- and 15-year-olds, and most children under age 14 cannot be hired at all, except for a few specified kinds of jobs, like delivering newspapers or working as a golf caddy. (e) State Occupational Safety and Health Laws. Approximately half of the states have their own OSHA-like agency, charged with administering the state's own occupational safety and health laws. The remaining states have no such enforcement agency, and thus rely instead on the federal Occupational Safety and Health Administration (OSHA) to administer the federal job safety rules within such states. Hawaii is one of the states that has its own OSHA-type agency. To determine if your workplace is in compliance with federal and Hawaii job safety requirements, you may wish to contact the Hawaii Occupational Safety (HIOSH) of the Hawaii Department of Labor and Industrial Relations and request a free on-site safety consultation. You will not be cited for any violations detected, provided that you promptly correct the unsafe conditions. This differs from the rules for consultations by federal OSHA inspectors, who are required to cite you for any violations they find. Note that you must post in the workplace the HIOSH poster, Safety and Health Protection on the Job, or be subject to a possible fine of $1,000. For information on your job safety and health obligations as an employer, required posters, and possible on-site safety consultations, see the contact information for the Division of Occupational Safety of the Hawaii Department of Labor and Industrial Relations, listed in Section VI(a). (f) Other Miscellaneous State Labor Laws. Other Hawaii labor laws you need to be aware of, as an employer, include the following: (1) Wage payments to employees. Employers are generally required to pay wages at least twice each month, although monthly payment is permitted in some cases if a majority of employees in a collective bargaining unit (labor union) vote for it in a secret ballot election. Each payday, you must furnish each employee a statement of earnings, deductions, net pay, and pay period covered. An employee who is discharged must be paid on the same day, or, if not possible, no later than the next working day. An employee who quits must be paid by the next regular payday. However, if the employee who quits gives at least one pay period's notice of quitting, he or she must be paid all wages owed on the final day of work. (2) Right-to-work laws. About half the states have enacted "right-to-work" laws, which guarantee that no person may be denied employment for refusing to join a union or for not paying union dues, thus banning either "union shop" or "agency shop" agreements, or both. In a union shop, an employee not belonging to a union may be hired but then must join the union, usually within 30 days. In an agency shop, an employee need not join the union but, to remain employed, must pay union dues. Hawaii is a heavily unionized state. It does not have a right-to-work law and it allows union shop or agency shop contracts between an employer and a union. (3) State anti-discrimination laws. In addition to complying with federal anti-discrimination laws, employers must also be aware of and comply with state civil rights laws in Hawaii, and display a poster informing employees of their rights. Hawaii anti-discrimination and civil rights laws include laws regarding equal pay, regardless of gender, and fair employment laws, generally similar to the federal laws, but also covering marital status, sexual orientation, medical condition, mental or physical disability, and arrest and court record. Employers may, however, inquire into a job applicant's or employee's criminal conviction record, and may withdraw a job offer or terminate an employee if such conviction record bears a rational relationship to the duties and responsibilities of the position. In addition, various types of employers, such as armed security services, security guard and detective services, or federally regulated financial institutions, may fire or choose not to hire a person due to a criminal conviction. You can obtain required posters and informational booklets from the Honolulu office of the Hawaii Department of Labor and Industrial Relations, at the address listed in Section VI(a), or contact the Hawaii Civil Rights Commission at the address listed for it in Section VI(a). (4) Reporting new hires. Under federal welfare reform laws, employers in all states must now report newly-hired (or rehired) employees to a designated state agency (the Child Support Enforcement Agency for Hawaii employers) within 20 days after the date of hire. If reporting electronically or magnetically, reports must be filed twice a month, on dates not less than 12 nor more than 16 days apart. See the contact information for new hire reporting in Section VI(a) and the Internet web site address for the CSEA in Section VI(c). (5) Family and Medical Leave Act. Besides the federal Family and Medical Leave Act, which generally applies to companies with over 50 employees, Hawaii has its own such law, which predates the federal law by two years. The Hawaii law applies only to companies with 100 employees or more for each working day during 20 or more weeks during the current or preceding calendar year. Employees must have been on the job for at least six consecutive months to be eligible for leave. The Hawaii law is generally similar to the federal. It provides that an employer must allow employees four weeks of leave of absence during any calendar year for family or medical purposes, such as the birth or adoption of a child or a serious health condition of the employee, spouse, child, or parent. The leave can be paid, unpaid, or a combination of both, and either the employer or employee may elect to use accrued sick leave or vacation time as part of the mandated family leave. One important difference in the Hawaii law is the fact that Hawaii recently became the first state to recognize "reciprocal beneficiary" agreements between persons of the same sex, treating domestic partners under such agreements the same as married couples, for purposes of various health programs, including the Hawaii family and medical leave law. State law also provides that any employer of 50 or more employees must allow up to 30 days of "victim leave" to an employee who is either the victim of sexual or spousal abuse, or who has a minor child who has incurred physical or psychological injury or disability due to sexual violence, and smaller employers must grant up to 5 days of such victim leave. Such leave is to be for purposes such as seeking medical attention, counseling, seeking refuge, or taking legal action, among other reasons. (6) Workforce Reductions. Hawaii has a law, somewhat similar to the federal "W.A.R.N." Act, that requires an employer with 50 or more employees within the state to give advance written notification at least 60 days before making a plant closing, partial closing, or relocation that results in a mass layoff of employees in the state. An employer that fails to provide the required notice to employees can be held liable for up to 60 days pay to each of the laid-off employees plus civil penalties of $500 a day. (7) Smoke-Free Hawaii workplace rules. Effective November 16, 2006, it became illegal under the newly enacted Smoke-Free Hawaii law for businesses to allow smoking in the workplace or in any enclosed public spaces. Smoking in workplaces is prohibited even in private offices. In addition, no smoking is allowed within 20 feet of doorways, windows, and ventilation intakes of the above areas. Businesses that fail to comply will be fined $100 for a first offense, $200 for a second offense within the next year, and $500 for each additional offense within a year of the preceding offense, and businesses may risk suspension or revocation of their business licenses. There are only limited exceptions to the smoking ban, such as for hotels, which may set aside up to 20% of their rooms for smoking, and smoking is allowed in fully open-air workplaces, such as construction sites and beach stands. (8) Lie Detector Tests Prohibited. Hawaii state law generally prohibits employers from requiring any employee or job applicant to submit to a polygraph test, voice stress analyzer, or any other type of test that utilizes any device that intrudes into any part or cavity of the body for the purpose of truth verification (lie detector tests) as a condition for obtaining employment or continuing in employment. Unlike the lie detector test prohibitions under federal law or under most other states' laws, the Hawaii law makes no exceptions for any types of businesses. VI. STATE SOURCES OF HELP AND INFORMATION (a) Key State and County Agencies Contact Information. Hawaii, as many states have done in recent years, has set up a "one-stop" center to help your new or existing businesses to obtain all necessary state licenses and permits from a single office, without your having to go from agency to agency to meet all the legal and regulatory licensing requirements. To obtain business registration forms and information on starting or relocating your business in Hawaii, contact the Hawaii Business Action Center, now part of the Department of Commerce and Consumer Affairs, with offices on Oahu and in Kahului on Maui and, since early 2008, on the Big Island (Hilo). On Oahu, they are located on the North Nimitz Highway, just a short distance Ewa (west) of Pier 35. Business Action Center A Business Action Center has also been opened on Maui. The Maui Business Action Center is located at the Maui Mall in Kahului, at the following address: Business Action Center The new Business Action Center in Hilo on the Big Island of Hawaii is now open, on Thursdays from 9:00 a.m. to 3:00 p.m. at: Business Action Center Business Action Centers Web site: http://hawaii.gov/dcca/areas/bac/ See also the address for the Business Registration Division of the Department of Commerce and Consumer Affairs, listed immediately below, which is where you should register for your state business license and file any partnership, LLC, or corporation documents. The Business Registration Division fulfills the functions usually administered by the secretary of state or corporations commissions in most other states. Addresses and other contact information for other key state and federal government agencies in Hawaii, mentioned in preceding sections of this book, are listed below for your convenience. DEPARTMENT OF COMMERCE AND CONSUMER AFFAIRS. Contact this office for information on:
Business Registration Division COUNTY BUSINESS LICENSES.
The Department of Finance of three of Hawaii's four counties issues
county business licenses. Drivers' licenses are also issued by the
counties in Hawaii, rather than by the state. Contact the Department
of Finance office listed below in your county, or the Department of
Budget & Fiscal Services for Honolulu City and County, at:
TAXES. Obtain state income, General Excise Tax (GET), and other miscellaneous business tax forms, instructions and information from the Hawaii Department of Taxation, which is the main tax collection agency in Hawaii. Also register with this agency as an employer, for state income tax withholding purposes. Taxpayer Services Branch STATE LABOR LAWS. Contact the appropriate division of the Hawaii Department of Labor and Industrial Relations about your obligations as an employer under various state labor laws, including:
Hawaii Department of Labor and Industrial Relations NEW HIRE REPORTING. Report newly hired or rehired employees within 20 days, by mail or fax, to the Child Support Enforcement Agency (CSEA), at the following address: Child Support Enforcement Agency STATE LICENSES. The state has a large number of agencies that require different types of licenses for different kinds of businesses, with fees that vary considerably. See the contact information above for the Business Action Center, which has been set up to help you find your way through this maze of permits and licenses. Also, see the listing above for the Business Registration Division of the Department of Commerce and Consumer Affairs, from whom you will need to obtain your state license for any kind of business. STATE SALES TAX (GET). Obtain your General Excise Tax license and information on the Hawaii General Excise Tax law from the Hawaii Department of Taxation, at the address listed above for that agency. EMPLOYER WITHHOLDING. Contact the Hawaii Department of Taxation to register as an employer, for purposes of Hawaii income tax withholding, at the address listed above for that agency. STATE UNEMPLOYMENT TAX. Contact the Division of Unemployment Insurance of the Hawaii Department of Labor and Industrial Relations, at the address listed for that agency above, to determine whether you are an employer subject to payment of state unemployment taxes, and for registration as an employer for a state employer identification number. WORKERS' COMPENSATION INSURANCE. If you employ workers for whom you must supply workers' compensation coverage, contact the Disability Compensation Division of the Department of Labor and Industrial Relations, at the address listed above for that agency. STATE OSHA PROGRAM. For information on both federal and state occupational safety and health laws that affect you as an employer in Hawaii, and for free workplace safety consultations, contact the Division of Occupational and Health (HIOSH) of the Hawaii Department of Labor and Industrial Relations, at the address listed above for that agency. STATE ANTI-DISCRIMINATION LAWS. For information on state civil rights laws in Hawaii, contact: Hawaii Civil Rights Commission (b) Small Business Development Centers. A number of Small Business Development Centers (SBDCs) are located throughout Hawaii to assist you. These centers, usually located on college campuses, provide a wealth of start-up information and sponsor frequent business-oriented seminars. Contact the lead office below for information, or for the location of other SBDCs nearer to you. Hawaii Small Business Development Center Network (c) Internet Sites. For anyone with access to the Internet, there is a wealth of state and even local business information provided by state and local governments. All states now have a state government Web page, and most major Hawaii state agencies also have sites on the Internet where you can obtain useful small business information on matters such as state taxes, financing sources, or the addresses and phone numbers (or e-mail addresses) of various state and federal agencies' offices in Hawaii. Since new sites are appearing frequently, you might also want to search for other Hawaii government Web sites by using one of the popular Internet search engines, such as Google or Yahoo. To start your Internet search for Hawaii government information, you may want to begin with the following Internet sites: State of Hawaii Home Page: Hawaii Department of Taxation (tax forms and information): Department of Commerce and Consumer Affair, Business Registration Division (incorporation, formation of LLC's and registration of business entities): Hawaii Small Business Development Center Network (assistance for small businesses): Hawaii Department of Labor and Industrial Relations (enforces workers' compensation, unemployment taxes, temporary disability and prepaid health care insurance, state wage-hour and child labor laws, workplace safety programs, employment discrimination): Hawaii Venture Capital Association (venture capital financing sources): New Hire Reporting and Child Support Enforcement info for employers (CSEA): (d) Financing Sources. For information and help on locating financing for your small business, contact the U.S. Small Business Administration (SBA) office in Hawaii, or contact the Business Action Center (listed in Section VI(a)) for information about sources of small business financing resources in Hawaii. The address of the Hawaii SBA District Office is: U.S. Small Business Administration Or, if you are seeking venture capital financing, contact the following private nonprofit organization that encourages growth of venture capitalism and entrepreneurship in Hawaii: Hawaii Venture Capital Association |
Copyright © 2009 Michael D. Jenkins
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