Hawaii LLC Taxes

If you want to ensure your limited liability company (LLC) is operating legally in Hawaii, it’s crucial you have a solid grasp of the tax responsibilities that apply to it.

In this article, we cover the various Hawaii LLC taxes that your business may be liable to pay, as well as guide you through the process of filing your Hawaii tax return as an LLC in this state.

Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes. 

How Is an LLC Taxed in Hawaii?

Taxation in Hawaii isn’t applied in the same way to all LLCs – instead, it varies depending on a number of factors, such as an LLC’s nature, locality, and tax election.

While LLCs typically benefit from pass-through taxation by default, they can elect to be taxed as one of the following:

• C Corporations: The LLC is treated as a separate entity to its owners, paying corporate income tax rates on its total profit while the owners also pay personal income taxes on any distributions they take.
• S Corporations: In return for paying owners a “reasonable salary,” the LLC’s remaining profits are distributed among members without a need to pay FICA or self-employment taxes on them.

The following sections go into the various tax responsibilities of your LLC at local, state, and federal levels in Hawaii to help you ensure your LLC navigates them effectively.

Hawaii Local Taxes

The local laws and tax regulations differ greatly between different localities in Hawaii, where several unique taxes are in place at a local level.

Below is a list of tax types that your city or county may impose:

Local General Excise Tax

In Hawaii, county governments are permitted to add their own local surcharge on top of the statewide General Excise Tax (GET) rate of 4%. For the moment, only the following counties have adopted a county surcharge:

• Honolulu: 0.50% 
• Kauai: 0.50% 
• Hawaii: 0.25% 
• Maui: 0.50%

In Hawaii, whether a business is liable to pay a local county surcharge depends on where its activities are conducted. This means that if your LLC engages in activities in a county that has implemented a surcharge, it will need to pay that county’s surcharge regardless of where your business is based.

Note: These additional local surcharges are not applicable to business activities that are taxed at reduced statewide GET rates of 0.50% or 0.15%.

Property Tax

In Hawaii, there is no statewide property tax; instead, it is set and managed by each individual county. Local governmental bodies will appraise the value of your business’s property, applying the relevant local property tax rate to it in order to calculate your tax bill.

In addition to these differences between counties, there are also different classes of real property within each county that are subject to unique tax rates. These classes vary between each county, but some of the most common property types include:

• Agricultural
• Commercial
• Hotel and Resort
• Industrial

Note: For more information on how property tax works in your county, contact either your county’s officials or refer to the Real Property Tax Rates for the current tax year.

Recommended Service: Schedule a free consultation with 1-800Accountant to ensure your business remains legally compliant. 

Hawaii State Taxes

Every state has its own regulations and rules that dictate how it taxes individuals and businesses. Below is a list of the most relevant state-level Hawaii taxes for LLCs. 

Income Taxes

LLCs based in Hawaii are required to pay income taxes on their earnings at a state level in addition to any federal tax obligations. As an LLC based in this state, you’ll need to pay one of the following two types of Hawaii state income tax:

• Personal Income Tax: This is a gradual tax paid by each of an LLC’s members at a rate that ranges from 1.4% to 11% depending on their income level. To find out how much you’ll need to pay in personal income tax, refer to the Hawaii Department of Taxation’s Individual Tax Tables.
• Corporate Income Tax: If your LLC is structured as a C Corp, it will need to pay Hawaii corporate income tax on its adjusted net income at a rate that varies between 4.40% and 6.40%, depending on how much it earns.

State General Excise Tax

While Hawaii doesn’t levy a statewide sales tax, it does impose a General Excise Tax (GET) that functions very similarly, except that it’s a tax on businesses rather than customers. GET is charged on your LLC’s gross income from almost all business activities within Hawaii at a flat rate of 4%, though additional surcharges applied by local jurisdictions can increase this up to as much as 4.50%.

Most physical goods (i.e., personal property such as clothes, electronics, and furniture) and business activities are taxable according to this statewide rate – though certain activities are subject to separate rates, such as:

• Wholesaling Goods, Manufacturing, Producing, or Providing Wholesale Services: 0.50%
• Insurance Commission: 0.15%

In addition to the GE tax, your business is also required to report use tax, which is collected on the importing of unlicensed products into the state and reported on the same tax return as the GET.

Note: For your LLC to be able to pay these taxes, you’ll first need to obtain a GET license in Hawaii. This can be done through the Hawaii Tax Online platform by filling out the Hawaii Basic Business Application (Form BB-1) and paying a one-time registration fee of $20.

Employer Taxes

Every business in Hawaii that has employees will have additional tax responsibilities they’ll need to fulfill. Two of the main state-level taxes that you’ll need to pay as an employer in Hawaii include:

Withholding Taxes

As is the case in most states, you’ll need to deduct a proportion of your employees' wages in order to pay Hawaii income tax to the government on their behalf. The rates of withholding tax that you’ll need to collect can vary from 1.4% to 11%, depending on each employee’s individual income tax bracket. 

Withholding tax returns need to be submitted on a quarterly basis by the following deadlines:

• First Quarter: April 15
• Second Quarter: July 15
• Third Quarter: October 15
• Fourth Quarter: January 15

Note: Before you can start filing your withholding tax returns, you’ll need to request a withholding account number using either Form BB-1 or your Hawaii Tax Online account.

Unemployment Insurance Taxes

This is a gradual tax your LLC is liable to pay on the first $56,700 of each employee’s wages — though all income in excess of this taxable wage base is exempt. Generally, new employers will pay Unemployment Insurance (UI) taxes at a fixed rate of 4% for the first three years, before switching to a contribution rate that varies between 0% and 6.2% depending on their average annual taxable payroll.

If you need to pay this Hawaii tax, you will also be required to file a quarterly UI tax report online with Form UC-B6 by the following deadlines:

• First Quarter: April 30
• Second Quarter: July 31
• Third Quarter: October 31
• Fourth Quarter: January 31

Note: Your LLC will need to register for an account with the Hawaii Department of Labor and Industrial Relations in order to pay this tax and submit Form UC-B6.

Business Privilege Taxes

Depending on your business’s activities, it may need several additional tax licenses on top of those outlined above in order to operate legally. In Hawaii, there are a number of specific sectors and business activities that are subject to these particular business privilege taxes, including:

• Cigarette and Tobacco Taxes
• Liquor Taxes
• Conveyance Tax
• Estate and Transfer Tax
• Fuel Tax

The specifics of each of these taxes – including rates, filing requirements, and exemptions – will vary on a case-by-case basis, which makes it important to consult an accountant in order to ensure your LLC’s compliance.

Note: You can find more information about these taxes under the “Other Taxes” section of the Hawaii Department of Taxation website.

Federal Taxes

Regardless of where your business is located, if you run an LLC in the US, there are a number of federal taxes you’ll need to pay. Below are some of the main types your LLC may be required to pay for federal tax purposes:

Income Tax

By default, the Internal Revenue Service (IRS) will not treat single and multi-member LLCs as separate entities from you for tax purposes. What this means is that you’ll need to report your share of your LLC’s profits on your individual tax returns and pay federal income tax on them at the personal rate of your tax bracket.

Having said that, keep in mind that LLCs can also elect to be taxed as C corps or S corps, which changes how these federal income taxes are levied in different ways.

Self-Employment Tax

In addition to income tax, members of single- and multi-member LLCs will need to pay self-employment tax on the share of the business’s profits that they report on their personal tax return at the end of the year.

This tax is levied at a flat rate of 15.3% against businesses with net earnings that exceed $400, though it is applied slightly differently to LLCs that have elected to be taxed as S corps or C corps.

Employment Tax

If your LLC hires any employees, it will need to withhold a portion of their salaries to cover various types of taxes on your employees’ behalf – including Social Security, Medicare (FICA), and payroll taxes.

Furthermore, the members of any LLCs that have elected to be taxed as an S corp will be required to pay employment taxes on their salaries. However, in return for this, the remainder of the business’s profit after these salaries have been distributed will be safe from both self-employment and FICA taxes.

Excise Tax

If your LLC engages in certain types of business (such as the sale of alcohol and tobacco or operating a heavy highway vehicle, among others), it may need to pay federal excise taxes in order to do so legally. Each excise tax comes with its own set of rules, rates, and filing obligations you’ll need to be aware of.

Understanding and fulfilling these federal tax obligations is crucial for keeping your LLC compliant and avoiding unnecessary financial penalties and/or fines.

How to File LLC Taxes in Hawaii

Below, we’ve outlined the general process an LLC in Hawaii will need to follow in order to file their tax return correctly. Note that the specificities of each step will vary slightly depending on how your LLC is organized and the specific locality it’s based in.

Step 1: Gather Your Documentation

To ensure accurate tax filing, thorough record-keeping is essential. Begin by collecting your personal information, including:

• You and your partner’s Social Security number, date of birth, and residential address
• The previous year’s tax returns
• Your LLC’s Federal Tax Identification Number

Then, you’ll need to gather all documentation related to your business’s income, such as:

• Invoices you’ve issued
• Sales transaction logs
• Electronic payment reports from services like PayPal or Stripe

Lastly, assemble all records pertaining to your business expenses, which should cover:

• Lease receipts for your business premises
• Bills for utilities
• Records of office supplies purchases
• Documentation of business-related travel
• Payroll records for employees

Note: Depending on how your LLC is organized and its tax election, you may need different information for your tax return. 

Step 2: Find The Right Tax Forms

Once you've gathered all necessary documents, the next step is to select the correct tax forms for your LLC based on its organization:

• Single-Member LLCs: The business’s total income and expenses are reported on a Schedule C form, which is attached to the owner’s personal tax return and due by April 15 or the following business day if it lands on a weekend or holiday.
• Multi-Member LLCs: File an information return using Form 1065. Members must fill out a Schedule K-1 showing their individual earnings or losses by March 15 or the next business day.
• C Corporations: File a corporate tax return using Form 1120 by the April 15 deadline or on the next business day if it's a weekend or holiday.
• S Corporations: Use Form 1120-S for the corporate tax return and distribute Schedule K-1 forms to shareholders for reporting their shares of profits or losses. The deadline to file and pay taxes using 1120-S is March 15 or the following business day.

Since state and local taxes will have their own individual forms and requirements, we recommend contacting your municipality or hiring an accountant for guidance.

With the appropriate documentation gathered and the correct tax forms for your business entity on hand, you’ll be ready to fill them out and submit them.

Step 3: File Your Taxes

The majority of businesses choose electronic filing for its speed, enhanced security, and reliability compared to paper filing, which can be slower and more prone to errors. Here’s how it works:

• Federal Tax Returns: The IRS provides two electronic services for tax submission: Free File for businesses with an AGI below $72,000 and Free Fillable Forms for those above the threshold.
• State and Local Tax Returns: While filing requirements can vary depending on the tax in question, you’ll be able to submit the majority of your tax returns online using either Hawaii Tax Online or the forms found on the Hawaii Department of Taxation website.

Note: These electronic filing tools are best suited for those who are already confident in handling their LLC taxes as if filling out a paper form. 

For new business owners, we recommend opting for the expertise of a tax professional in order to ensure both accuracy and compliance in your tax filings. 

Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes. 

Keep Your Hawaii LLC Compliant

While LLCs are generally easier to maintain than corporations, there are certain state and local formalities your LLC must satisfy in order to remain compliant. 

Annual Report Filing

Hawaii LLCs need to file an annual report with the Hawaii Business Registration Division in the Department of Commerce & Consumer Affairs (DCCA) to stay in good standing with the state.

The purpose of this report is to provide the state and general public with the most up-to-date information on important aspects of your business, such as:

• The names and addresses of its key personnel
• The information of your LLC’s registered agent
• Your LLC’s contact info for official communication

The deadline for filing your annual report is determined by when you initially formed your LLC in Hawaii, according to the dates listed below:

	Filing Due Dates
Between January 1 and March 31	March 31
Between April 1 and June 30	June 30
Between July 1 and September 30	September 30
Between October 1 and December 31	December 31

Failing to file your annual report by its deadline can lead to a $10 penalty and your business being administratively dissolved if you’re delinquent for over two years.

Note: You can avoid these late penalties by filing your annual report through the Hawaii Business Express platform — it’s the simplest and most cost-effective method, costing $12.50 compared to $15 for paper filing.

Licensure and Tax Requirements

In Hawaii, almost all businesses are required to obtain various licenses and permits at the local, state, and federal levels. Below, we’ve broken down three of the most common types your LLC may need:

• Professional Licenses: Businesses in Hawaii providing specialized services, such as accountancy, auctioneering, or pawnbroking, need to acquire particular licenses from the Professional & Vocational Licensing Division (PVL) of the Department of Commerce and Consumer Affairs, to ensure they adhere to Hawaii's professional standards.
• Environmental Permits: In Hawaii, businesses that could affect the environment or public safety must obtain appropriate permits and licenses, governed by specific boards or agencies depending on the business's potential environmental or safety impact.

Hawaii LLC Taxes FAQs