Kauai General Excise tax update for 2019

February 14, 2019

Per State of Hawaii Dept of Taxation Announcement no. 2018-14 

On December 11, 2017, Ordinance No. 1021 was enacted in Kauai County. Ordinance No. 1021 authorizes the imposition of a county surcharge (CS) on general excise tax (GET) for Kauai County beginning on January 1, 2019 and ending on December 31, 2030at the rate of 0.5%. Sincethe retail GET rate is 4%, the total rate of tax imposed on transactions subject to the Kauai CS is 4.5%.……………

Rate of Tax Visibly Passed on to CustomersGET is levied on the gross receipts of a business, including amounts that are passed on andcollected as GET from customers.To account for this imposition, the maximum rate that may be passed on to customers is higher than the statutory rate of 4.5%(4% GET + 0.5% Kauai CS).However, a seller is prohibited by consumer protection law from visibly collecting more than the amount actually owed.

The maximum rate that may be visibly passed on in Kauai County is 4.712%.This pass on rate is limited to six decimal placesandis calculated as follows. When the taxes are visibly passed on the gross receipts consist of the price and tax. The price represents 95.5% of the gross receipts and the tax represents 4.5% of the gross receipts. The tax stated as a percent of the price is 0.047120 or 4.712%(4.5% divided by 95.5%).

It is important to note that the 4.712% rate is the maximum rate of tax that may be visibly passed on. Sellers may also pass on the tax at the statutory rate of 4.5% or may elect not to visibly pass on the taxat all.