Thursday, April 23, 2015

Taxing With Aloha – Hawaii Loves Your Taxes!

Hawaii is a taxeriffic state. A word that I just made up. You may have heard of those Caribbean islands which are offshore tax havens. Hawaii’s just the opposite of that. If there’s a tax, it exists in Hawaii. If it’s a tax that doesn’t exist yet, Hawaii will think of it.

"Taxing You With Aloha" should be the motto of the Hawaii Department of Taxation.
Hawaii’s taxes include: state sales tax, income tax, transient accommodations tax, general excise tax (GET), fuel tax, liquor tax, vehicle weight tax, and real property tax. There are also taxes on utility companies which probably contribute to the high electric costs on Maui.

A brief overview of taxes (because I’m not a CPA):

State income tax: Hawaii can hit you up for as much as 11% of your net earnings. The standard deduction in Hawaii is so small ($2000-4000) compared to the federal standard deduction ($6000-$12000), that it’s better to itemize deductions if you can keep good records. 

Important Note: Hawaii taxes part time residents. If you pay state income taxes elsewhere but reside in Hawaii part of the year, Hawaii also wants to tax you. One side effect is that some people (probably those darn 1%ers) who live in Hawaii full-time, claim residency in another state with no or little state income tax. (This probably happens elsewhere too.)

Ninja Rat works for the Hawaii Department of Taxation.
Watch out for those nunchucks!

True Story: When my mother passed away, I had to do her taxes. DH and I called the Hawaii Department of Taxation the same way one can call the IRS, to ask a question about the tax return. The tax agent confirmed that yes, we could take a particular tax credit. After we filed the taxes, the state sent us a letter saying we had made a mistake, and needed to send in some taxes and also pay a fine! When we talked with the state again and told them the name of the agent who had given the incorrect information to us, they said it didn’t count. In short: it doesn’t matter what the Hawaii tax agent tells you. They can interpret your taxes any way they wish. Unlike with the IRS, the matter is not up for discussion.

Sales tax: 4.167% which is an odd amount. Everything is taxed. Some states don’t tax groceries, but Hawaii taxes everything. We can’t just hop on a ferry to Oregon, which has no sales tax, and go shopping. (Californians and Washingtonians who live close to Oregon love to cross the border to do their daily shopping because…people are people… This also explains the popularity of Amazon Prime in Hawaii – no sales tax and free shipping. Free shipping is like a drug in Hawaii.)

Transient Accommodations Tax: Hawaii knows that tourists love to come to Hawaii and need a place to sleep. It’s basically a hotel or vacation rental tax, at about 9.25% in addition to the sales tax. Time shares are taxed at a different rate.

Side note: Religious organizations do NOT have to pay this tax. Some churches offer Bible studies classes in Hawaii which include accommodations and plenty of beach time – it’s like church on vacation. (Somehow I have an image of students sipping virgin mai tais on the beach and reading Proverbs.)

Side note 2: AirBnB has become very popular in Hawaii. It allows individuals who are not otherwise in the vacation rental business to rent lodging in their home. Many individuals do not officially pay the TAT to the state. The State wants this tax revenue.

Property Tax: Varies based on zoning.

Vehicle Weight Tax: The heavier your car or truck is, the more it costs to register it each year. 

General Excise Tax: A tax on business and self-employed persons. For example, if you charge a service for a business as an independent contractor, if you sell items wholesale to a business, or if you are a landlord and collect rent, you have to collect a 4% tax. Some people who start a business forget to pay their GET (much less collect GET) their first year and get a BIG shock when they have to file their taxes.

If you are fascinated by taxes, you might enjoy visiting the Tax Foundation of Hawaii. Their site is pretty easy to follow, even for tax-challenged people.

By the way, April is also when the County of Maui reviews its fiscal budget and asks for community input on raising taxes or spending tax money.

Here's a shortcut to the archives for the A to Z Challenge and other blog posts.

(By the way, while I have your attention, two friends are running interesting projects:

The theme of this year’s A to Z Challenge is Living on Maui: A Beginner’s Survival Guide. While I can’t include everything in only 26 short blog posts, this is my foolish attempt.

If you are participating in the Ato Z Challenge, please use either Disqus or Facebook to comment below. Please include your link so that I can visit you back, but it might be as late as May!


  1. Eish Courtney as we say here in SA! Tax schmax ... we're taxed to the eyeballs here and they always want more and then some more again.We have the largest govt in the world I believe, living it up at tax payers' expense who form only about max 10% of the population, I kid you not. That's why I say EISH when I hear that tax schmax word.

  2. Didn't know South Africa had such taxes, but don't they give you really long vacations (or is that in Europe)? In the states, I know California taxes are awful. People from CA always think they are getting a bargain in Hawaii!

  3. Woah, that's harsh! You're putting me right off Hawaii! I bet there's a lot of wonderful things to balance it all up with though :)

    Fee | Wee White Hoose
    Scottish Mythology and Folklore A-Z

  4. There are lots of wonderful things about Hawaii, but taxes are not one of them. The other thing people love to complain about is "how hard it is to do business in Hawaii" and that Hawaii is not a business friendly state due to regulations, taxes, etc.

  5. RI invents taxes too - and a vehicle worth $1000.00 is taxed on a value substantially more. Maybe Hawaii took their lead from RI! -

  6. This doesn't sound very good! I mean, what do you get to keep after all that taxation? Aside: That Ninja Rat is the cutest thing I've seen today :)

    *Shailaja/Alternate Angles/A-Z*

  7. We lived in Hawaii for five years (Oahu) so understand a lot of what you've written about, i.e., red dirt, taxes, schools (my husband and his sister went to school on Oahu in the early 60s. They were the only haole kids in the whole school and experienced the discrimination you so aptly described in your Schools post), and the gecko poop and bugs. I read all the way back to Natural Disasters.

    Good blog.

  8. You guys do pay a lot of tax. In California our sales tax is a bit high, in my opinion. Then sometimes when I go to a store that is outside of one city and in an unincorporated area, another California funny thing, I also pay a county tax in addition to the state sales tax. But it looks like you guys are hit harder with many other types of tax, and even though our state income taxes are higher than the federal rates, I think not as high as Hawaii. Another weird exception is if you live in the mountains of Southern California and one day a town decides your street is no longer going to be plowed by the county when it does snow. You still pay county taxes, but now you get to pay a special tax to have your road plowed. Interesting coincident is around the time that tax was being proposed some guy with a plow was offering his services. Too many incorporated and unincorporated parts in California.

  9. Ninja Rat is my favorite pal. I think I'll use him in more photo shoots! I was trying to make an unhappy topic a little more fun.

  10. Our vehicle tax is based on weight - the idea is that if it's heavier, it is compressing the pavement more. I'm sure Hawaii is paying attention to creative taxes that other states have imposed.

  11. Really appreciate the validation! I bet your husband and sister have a lot of stories growing up there. I'm always interested to hear what other people say about their time in Hawaii.

  12. Wow, at least we don't have county sales tax on top of state sales tax. I know some cities have a city tax on wages. I'm not sure what other states have GET tax or whether it's particular to Hawaii. That's an interesting example too, with snow service. Our taxes do not include residential trash pick up. That's another fee one has to pay. Maybe other places include that in their taxes?

  13. Yikes. Taxes are never a fun subject. I suppose there's a downside to every paradise though. Also, ninja rat is adorable!

  14. One story from my husband's grade school days on Oahu when he and his sister were the only haoles...
    Everyone went to school in bare feet or slippahs. When a new elementary school teacher arrived, she asked the kids if they all had a disease on their feet because no one had shoes on. All the kids laughed and explained that's the way kids go to school in Hawaii.

  15. The utility and phone companies call the taxes they impose on us fees.

  16. So true! Walking in bare feet is very acceptable here. It was one of the first things my boyfriend at the time noticed. It's not uncommon for people to walk barefoot across a gravelly parking lot and for May Day, I remember walking across a courtyard with bare feet to perform one of our traditional songs. It's uncomfortable, but considered a way of proving oneself.

    Also, a friend told me that in the 60s and 70s, all the school teachers were haole and all the children were brown, so it made for a challenging dynamic. No role models for the kids that they could relate to.

  17. Probably a reason behind that, enmeshed in a tangle of legal stuff.

  18. Ninja rat is in his second life. He was originally on a stand, but his ninja rat battery died. It powered his nunchuks. There used to be fights b/w our cat and ninja rat. But I couldn't bear to toss him away so took him apart, and now he's a ninja rat puppet.


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