Paying taxes is an essential part of running a business. In fact, doing so is crucial to ensuring that your Hawaii business stays legally compliant with the state. Knowing exactly what taxes you need to pay and when can cause anxiety for even the most experienced small business owners. If filing state taxes has you feeling nervous, we’re here to help. Read on to learn more about the types of taxes you might face as a Hawaii business owner and how and when to pay them. You’ll also learn which of our products and services can help make the process smoother when tax time comes around.
If you need more complete legal compliance help, check out our Worry-Free Compliance service, which keeps your business documents organized and can help keep you on track with required business filings. If you’re looking for information about federal taxes, head over to our page on federal taxes for small businesses.
Step 1: Establish your Hawaii business’s corporate income tax obligations
The first step to take is to identify and understand your business’s corporate income tax obligations. The amount and rate you must pay depends on your business’s entity structure.
As in most states, Hawaii corporations will usually be subject to a corporate income tax. Specifically, the State of Hawaii taxes the income of corporations at a series of marginal rates from 4.4% to 6.4%. The Hawaii business tax rate brackets are as follows:
- Corporations with income up to $25,000 are taxed at a 4.4% rate.
- With income over $25,000 and up to $100,000, corporations are taxed at a 5.4% rate, minus $250.
- Corporations with income over $100,000 are taxed at a 6.4% rate, minus $1,250.
Importantly, however, not all small businesses will be subject to a corporate income tax at the entity level. Taxes for certain entities, referred to as pass-through entities, are instead paid by members and owners of the business itself on their individual income tax returns. Examples of pass-through entities include:
- Sole proprietorships
- Limited liability companies (LLCs)
- S corporations
If your business does owe corporate income taxes, these will be due on the 20th day of the fourth month after the close of the tax year. Thus, for businesses following the calendar year, the due date will be April 20th.
Step 2: Determine your Hawaii business’s employment taxes
In addition to business income taxes, you also need to understand your employment tax obligations.
In most cases, your Hawaii small business must pay state employment taxes if it has employees. Hawaii calls these withholding taxes. Withholding taxes are taken directly out of an employee’s wages and paid by the employer to the State of Hawaii.
An employer must withhold taxes on wages for any services performed within the state. It must also withhold taxes on wages performed outside the state if the services were performed by an employee whose regular place of employment for the employer is inside the State of Hawaii.
Withholding tax rates in Hawaii range from 1.4% to 7.9% depending on a number of factors. If your business must pay withholding taxes, it must file its returns quarterly. Thus, these will be due on April 15, July 15, October 15, and January 15 each year.
Step 3: Establish your Hawaii business’s additional state tax obligations
In addition to corporate income and withholding taxes, your business may have other tax obligations to be aware of.
For example, regardless of whether your small business must pay corporate income taxes, all persons and entities that conduct business in Hawaii must also pay general excise/use tax (GET). This tax is a privilege tax imposed on the gross income received by entities engaging in nearly any type of business activity. Further, even if you didn’t make any profit, your business must still file your GET return.
Another possible tax you may have to pay is unemployment insurance tax. These are also called UI contributions. If you’re an employer, you must pay these UI contributions based on your employees’ wages. These contributions are in turn held in a trust fund and are used to pay temporary benefits to eligible unemployed individuals.
Additionally, your business may need to obtain certain tax licenses depending on your business activities for goods and services related to transient accommodations, rental motor vehicles, cigarettes and tobacco, liquor, and fuel.
Step 4: Prepare to file and pay your Hawaii small business taxes
Once you’ve determined your tax obligations, you’re ready to prepare and file.
Hawaii Tax Online offers Hawaii business owners a convenient and secure way to e-file tax returns, make payments, and manage your accounts. Make sure to create an account to streamline the process and save time later on.
It’s true that filing your taxes correctly is crucial to the future success of your business. This can often make filing taxes for your Hawaii small business feel overwhelming and stressful. However, one of the best things you can do to relieve some of this stress is to prepare well in advance and make sure you have all the information you will need readily available.
Information and documents you will likely need to file your taxes include:
- Your Employer Identification Number (EIN)
- Business receipts
- Accounting records
- Legal documents
This means that it’s important to carefully track your business’s income and expenses.
Do I need an accountant?
It can seem tempting to want to handle everything on your own for your new or growing business. However, when it comes to filing taxes for your Hawaii small business, we recommend seeking some assistance from an experienced tax professional.
In fact, most small businesses will benefit greatly from professional accounting help. This is because failure to file your Hawaii small business taxes, or even just filing them incorrectly, can result in a number of severe consequences. Further, these consequences can fall on both the business entity as a whole as well as on you and any other individual owners.
Thus, if you do seek assistance, we also recommend that you work with an accountant that has the credentials and qualifications to help you with your small business tax needs.
Never be afraid to ask for help when it comes to something as important as your taxes.
Not sure how to stay compliant? Learn more about legal compliance for small business owners.
How we can help
Managing your own business takes an extraordinary amount of hard work and dedication. With so much on your plate already, worrying about your taxes can make things feel even more complicated. But we are here to help with the ZenBusiness Money App for invoicing and payments. The app allows you to easily send custom invoices, accept credit card and bank transfer payments, and manage your clients from an easy-to-use dashboard.
No matter what size your business is or what stage, we have the tools you need to help your business succeed.
Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
- How much can a Hawaii small business make before paying taxes?
Any business entity that conducts business within the State of Hawaii will have to pay some taxes. Thus, no matter what size your Hawaii small business is, you can expect to pay taxes, either at the individual or entity level.
- What percentage does a Hawaii small business pay in taxes?
In short, the answer is that it depends. The amount you’ll have to pay for business taxes in Hawaii will vary. This is because there are a variety of taxes, such as corporate income taxes, general excise taxes (GET), and withholding taxes, each with varying percentages and requirements.
- How does a Hawaii small business pay taxes?
Taxes for your Hawaii small business are due to the Hawaii Department of Taxation. You can easily and efficiently pay your taxes online through the Hawaii Tax Online portal.
- Do I have to file taxes for my small business in Hawaii?
Yes, you will have to file taxes for your Hawaii small business. Failure to do so properly and timely can lead to severe consequences for the business. Thus, make sure to speak with a qualified accountant to better understand and comply with your Hawaii tax obligations.