Alert - Hawaii General Excise Tax Exemptions


Effective July 1, 2011, the Hawaii general excise and use tax exemption for certain persons and business activities is suspended by the recently signed Act 105. For a two-year suspension period running from July 1, 2011 to June 30, 2013, certain formerly exempt persons and business activities will be subject to the 4% general excise or use tax rate.

A grandfathering provision exists which may save some from losing the exemption, but it requires a written contract that does not allow the passing on of increases in tax rates. The contract must be binding and entered into before July 1, 2011.

You should review Hawaii Department of Taxation Announcements Nos. 2011-09 and 2011-10 (linked in the documents below) to determine whether you fall into one of the suspended categories. Prominent on the list are sublessors that deduct amounts paid to lessors from rental income received from sublessees and the “subcontractor’s deduction,” the anti-pyramiding relief available to contractors for amounts received from subcontractors.

Time is short. If you have questions about this Legal Alert Update, please contact Christopher Pan at or (808) 531-8031.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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