Is Clothing Taxable in Hawaii? - Commenda

Is clothing taxable in Hawaii? Yes, it is. The taxability of clothing in Hawaii is an important consideration for businesses trying to understand the state’s sales tax laws. With varying rules based on specific clothing items, it’s essential to know when these items are subject to US sales tax compliance.

In this blog, we’ll explore the current taxability of clothing in Hawaii, explain the exceptions to the general rule, and offer guidance on how these laws affect your financial planning.

Is Clothing Taxable in Hawaii?

Yes, clothing is taxable in Hawaii. This state has a General Excise Tax (GET) rather than a sales tax. has a 4% state sales tax rate and an average combined state and local sales tax rate of 4%. 

There are limited exemptions, such as for certain types of clothing considered “necessary” or “protective.” However, in most cases, clothing items are subject to the GET, so businesses and consumers should be aware of this when making purchases or conducting transactions in Hawaii.

Hawaii Sales Tax Rate on Clothing

The Hawaii sales tax on clothing is subject to the GET, which functions similarly to a sales tax, with a base rate of 4%. Local jurisdictions, specifically the counties, can impose an additional surcharge, meaning the total GET rate on clothing can range from 4% – 4.5%, depending on the county.

If your business has physical nexus in Hawaii, meaning you have a tangible presence in the state, such as a retail store or employees, you must comply with GET regulations. This includes registering for a General Excise Tax number and filing returns through Hawaii Tax Online. Hawaii does not offer a general exemption for clothing from the GET. Local tax rates vary across the counties: for example, Honolulu has a GET rate of 4.5%, and other counties may apply the same or slightly different rates.

For precise GET rates applicable to specific locations, it’s advisable to consult Hawaii’s Department of Taxation resources or speak with a tax professional.

What are Hawaii’s Exemptions and Special Cases for Clothing?

When it comes to exemptions, Hawaii sales tax clothing rates do not provide specific exemptions based on price thresholds or categories like protective gear. Generally, all clothing items are subject to the GET unless specific exemptions apply. For instance, clothing purchased for resale or business use may be exempt under certain circumstances.

However, these exceptions are more related to business-use exemptions than specific clothing exemptions. While Hawaii does not offer general exemptions for clothing, certain items may qualify for exemption based on their use, such as when they are purchased for resale or exported outside of Hawaii.

These exemptions are subject to detailed criteria, so businesses and consumers should carefully review Hawaii’s tax regulations to ensure compliance.

Sales Tax Holidays: Hawaii does not offer any sales tax holidays for clothing. Unlike some other states that temporarily exempt clothing purchases from sales tax during specific times of the year, Hawaii does not have such tax-free periods for apparel.

Tax on Clothing in Hawaii: Local vs. State

If you’re wondering, “Is clothing taxable in Hawaii?” The answer is yes. Understanding the Hawaii state clothing sales tax is important for both consumers and businesses. While the state imposes a standard sales tax rate on clothing, local jurisdictions may add their own taxes, leading to variations in the total rate across different areas. 

Below is a breakdown of the tax rates and an example to illustrate the differences:

It’s also helpful to understand the broader context of VAT vs Sales Tax. VAT is a consumption tax applied at each production stage, while sales tax is charged only at the point of sale to the consumer.

In contrast to VAT and sales tax, Hawaii uses the General Excise Tax (GET). This is a broad-based tax applied to nearly all business activities, including sales of goods and services. Unlike sales tax, GET is levied on the gross income of businesses, meaning it is applied at every stage of the transaction, not just at the final sale to the consumer.

Sales Tax Registration Requirements for Clothing Sellers in Hawaii

If you’re planning to sell clothing in Hawaii and trying to determine “Is clothing taxable in Hawaii?”, then understanding the sales tax clothing Hawaii registration process is essential for ensuring compliance with state laws.

For businesses selling clothing in Hawaii, whether through a physical store or online, it’s important to comply with state sales tax requirements.

Physical Storefront

1. Visit the Hawaii Department of Taxation website and access the “Taxpayer Services” section.
2. Select “Register for a Tax License” and complete the registration form.
3. Provide necessary business information such as your business structure, Employer Identification Number (EIN), and estimated sales volume.
4. After submitting your application, you’ll receive a Hawaii Tax ID number and can begin collecting GET.

Online (E-commerce) Seller

1. Go to the Hawaii Department of Taxation’s “Taxpayer Services” page and select “Register for a Tax License.”
2. Enter your business details, including your EIN and estimated sales.
3. Once your registration is processed, you’ll receive your Tax ID.
4. Online sellers must collect GET based on Hawaii’s tax rate, irrespective of the buyer’s location within the state.

Wholesalers

Wholesalers follow the same registration process as other sellers. If you are purchasing clothing for resale, you can use the Form G-17 to avoid paying GET on resale items.

Key Points to Remember

• No Separate Sales Tax: Hawaii uses the General Excise Tax (GET), which applies to most business activities, including the sale of clothing.
• No Registration Fee: There is no fee to register for a GET license.
• Permit Validity: Your license remains valid as long as your business is operating.
• Economic Nexus: Out-of-state sellers must collect and remit GET if they have more than $100,000 in sales or conduct more than 200 transactions in Hawaii.

Sales Tax Filing Requirements for Clothing Businesses

While determining the Hawaii tax on clothes, businesses selling clothing are required to register for sales tax and comply with specific filing requirements. Once registered, companies must file sales tax returns to report and remit the collected tax:​

The following table summarizes the filing frequency:

• Zero Returns: Even if no sales were made, businesses must still file their GET returns, reporting zero income for the period.
• Electronic Filing: Businesses owing more than $4000 in sales tax are required to file their returns electronically through Hawaii Tax Online (HTO).

Implications for Remote Sellers and E-commerce Clothing Sales

In Hawaii, remote sellers, including e-commerce businesses selling clothing, are subject to economic nexus laws. If your business generates over $100,000 in sales to Hawaii customers in a calendar year, you must collect and remit Hawaii clothing sales tax, regardless of physical presence in the state. Failure to comply with these requirements could trigger a sales tax audit, so it’s important to stay compliant.

Registration Requirements for E-Commerce Clothing Sellers in Hawaii

• Register for Sales Tax: Register via the Hawaii Tax Online portal to obtain a GET number.
• Collect Sales Tax: Apply the applicable GET rate (4.5% for most sales, higher rates may apply depending on location) on taxable clothing sales to Hawaii customers.
• File Sales Tax Returns: File returns and remit taxes through the Hawaii Tax Online portal.

Remote Seller Requirements

• Sales Threshold: Remote sellers must collect and remit GET if sales exceed $100,000 or 200 transactions into Hawaii.
• Notice Requirement: Hawaii requires remote sellers to collect GET, with no option for providing a customer notice instead.
• Penalties: Failure to comply may result in penalties and interest charges.

Sales Tax Compliance Challenges for Clothing Businesses in Hawaii

Is clothing taxable in Hawaii? Yes, but businesses face challenges with remote sales, understanding exemptions, and tracking tax obligations accurately. The following are a few challenges faced by businesses:

• Tracking Tax Holidays: The clothing sales tax Hawaii does not include any sales tax holidays for clothing. However, e-commerce businesses selling nationwide may need to navigate local exemptions or sales tax holidays in other states.. 
• Different Tax Rates in Cities: Hawaii has local sales taxes, which vary by county and city. The state base rate is 4%, but combined state and local taxes can be higher depending on the location. Businesses selling in multiple states must track varying rates across jurisdictions.
• Managing Remote Sales Tax Compliance: With the implementation of economic nexus laws, remote sellers in Hawaii must collect sales tax if they exceed $100,000 in sales or 200 transactions into the state.
• Understanding Exemptions: While most clothing items are taxable in Hawaii, certain items may be exempt from sales tax. Sellers need to properly classify these items to avoid tax errors.

How Automation Helps Manage Hawaii Sales Tax?

Managing Hawaii clothing sales tax can be complex, especially with varying rates, exemptions, and remote sales obligations. Commenda simplifies this by automating the entire process.

Commenda automatically calculates the correct sales tax rates for each transaction, ensuring accurate compliance with Hawaii’s 4% rate and any applicable exemptions. It also tracks your sales activities to determine when economic nexus is established in Hawaii, prompting timely registration and tax collection.

The platform handles filing and remittance, reducing the risk of penalties, and generates audit-proof reports for easy compliance.

With seamless integrations to over 40 business tools, Commenda streamlines your workflow, saving time and minimizing errors. It’s the perfect solution to ensure your business stays compliant with Hawaii sales tax laws.

Ready to see how it works? Schedule a demo today and start simplifying your sales tax process.

FAQs 

Q. Are clothing accessories taxable in Hawaii?

Yes, clothing accessories such as jewelry, handbags, and belts are subject to the General Excise Tax (GET) in Hawaii. These items are considered taxable as they are not classified as everyday clothing.

Q. Is there a threshold for taxable clothing sales in Hawaii?

There is no specific threshold for clothing sales in Hawaii. All clothing sales are generally taxable unless specifically exempt, such as clothing purchased for resale.

Q. How do Hawaii sales tax rules apply to children’s clothing?

Children’s clothing is generally not exempt from GET in Hawaii. However, specific items like sports uniforms may be subject to tax depending on their classification.

Q. Are there specific rules for clothing sold at a discount in Hawaii?

Clothing sold at a discount in Hawaii remains subject to GET if it is a taxable item. The sales tax applies regardless of whether the item is discounted.

Q. Does Hawaii exempt clothing purchased for resale from sales tax?

Yes, clothing purchased for resale is exempt from sales tax in Hawaii, provided the buyer presents a valid resale certificate.

Q. How do Hawaii’s sales tax exemptions apply to used clothing?

Used clothing is generally subject to sales tax in Hawaii unless it qualifies for a specific exemption. The exemption primarily applies to items purchased for resale or those meeting other specific criteria.

Q. Are clothing alterations taxable in Hawaii?

Yes, clothing alterations are taxable in Hawaii. These services are considered taxable because they are associated with tangible personal property.

Q. Do Hawaii sales tax rules apply to out-of-state sellers selling clothing online to Hawaii residents?

Yes, if out-of-state sellers exceed $100,000 in sales or 200 transactions to Hawaii residents, they are required to collect and remit Hawaii sales tax.