Hawaii’s tax system throws a curveball at businesses: the General Excise Tax hits every transaction level, meaning vendors collect tax even on wholesale purchases unless you present a valid resale certificate. This certificate transforms a 4% or 4.5% tax burden into a manageable 0.5%, preventing the nightmare of tax pyramiding where the same inventory gets taxed repeatedly as it moves through the supply chain.
Compliance isn’t optional. A misstep with your resale certificate can trigger penalties, audits, and unexpected liabilities. That’s where Hands Off Sales Tax (HOST) comes in, simplifying the entire process so you can focus on running your business instead of decoding tax regulations.
What Makes Hawaii’s Resale Certificate Different?
In Hawaii, a resale certificate (Form G-17) allows businesses to purchase inventory at the reduced General Excise Tax rate of 0.5% instead of the standard 4% statewide rate or 4.5% in Honolulu. Unlike traditional sales tax exemptions, it’s a reduced rate that prevents double taxation.
The certificate serves one purpose: ensuring GET applies only when goods reach the final consumer. Without it, that same product gets taxed when the manufacturer sells to the wholesaler, again when the wholesaler sells to the retailer, and yet again at the consumer checkout. Tax pyramiding drives costs through the roof.
Hawaii GET vs. Traditional Sales Tax
Most states tax the consumer at checkout. Hawaii taxes the business on gross receipts, which is a fundamental difference that catches out-of-state sellers off guard. The GET applies to nearly everything: retail sales, wholesale transactions, services, construction, rentals. It’s comprehensive.
Here’s how the rates break down:
- Retailing: 4% statewide (4.5% in Honolulu with county surcharge)
- Wholesaling, Manufacturing, Producing: 0.5%
- Insurance Commissions: 0.15%
- Use Tax on Imports for Resale: 0.5%
Understanding these distinctions keeps your business compliant and your margins intact.
Who Qualifies for a Resale Certificate?
Businesses purchasing goods for resale can utilize the 0.5% reduced rate. This includes:
- Retailers and Wholesalers: Buying products to resell to customers or other businesses
- Manufacturers and Producers: Acquiring raw materials or components to create finished products
The Out-of-State Trap
Hawaii doesn’t recognize out-of-state resale certificates. Period. If you’re based in California with a valid California resale certificate, it’s worthless in Hawaii. You must register for a Hawaii GET license and obtain a Hawaii-specific Form G-17. Skip this step and you’ll pay the full retail rate on wholesale purchases. A costly mistake that eats directly into profit margins.
Getting Your Hawaii Resale Certificate: Step by Step
1. Register for Your GET License
Every business operating in Hawaii needs a GET license before they can issue resale certificates.
Online Registration (fastest method): Visit the Hawaii Tax Online portal and complete your registration electronically. You’ll get confirmation within 5-7 business days.
Mail-In Registration: Download Form BB-1 from the Hawaii Department of Taxation, complete it with the $20 registration fee, and mail to:
Hawaii Department of Taxation
P.O. Box 1425
Honolulu, HI 96806-1425
Processing takes 4-6 weeks by mail. Plan accordingly.
What You’ll Need:
- Business name and physical location
- Federal EIN (or SSN for sole proprietors)
- Detailed business description
- Ownership information with contact details
2. Complete Form G-17
Once you receive your GET license, you can complete the resale certificate for your suppliers.
Required Information:
- Seller’s name and address
- Your Hawaii Tax ID (format: GE-XXX-XXX-XXXX-XX)
- Description of your business activities
- Transaction type: wholesale or retail resale
- Your signature, title, and date
Single vs. Blanket Certificates:
- Single Purchase: One-time transaction with a specific supplier
- Blanket Certificate: Covers all ongoing purchases from a supplier until you revoke it in writing
Most businesses use blanket certificates. Less paperwork, fewer headaches.
Special Exemption Cases: Beyond the 0.5% Rate
While most resale transactions qualify for the reduced 0.5% rate, two scenarios can eliminate GET entirely, opportunities that many businesses miss.
Imported Goods Exemption
Hawaii Administrative Code §237-29.55 provides a full GET exemption for originally imported goods resold at wholesale. Here’s how it works:
The Scenario:
- Vendor A imports products into Hawaii (the original importer)
- Vendor B purchases from Vendor A to resell wholesale in Hawaii
- Both vendors hold valid GET licenses
- Vendor B provides Form G-17 to Vendor A
The Result: Zero GET on the transaction. Not 0.5%, but 0%.
Why This Matters: Hawaii wants to prevent double taxation on imported goods. The original importer already bore the import costs; subsequent wholesale transactions shouldn’t compound the tax burden.
The Catch: Both parties must retain copies of the resale certificate proving why no GET was collected. This documentation becomes critical during audits. The exemption continues through the wholesale chain until goods reach retail sale, where full GET applies.
Export Exemption
Purchasing goods for resale outside Hawaii? You may qualify for full GET exemption. If your business model involves buying inventory in Hawaii but selling and shipping to mainland US or international customers, proper documentation eliminates GET obligations entirely.
Using Your Resale Certificate Correctly
Present your resale certificate only when purchasing goods exclusively for resale. The 0.5% rate applies to legitimate wholesale transactions.
What You Cannot Buy Tax-Free
Don’t use your resale certificate for:
- Personal purchases
- Office supplies and equipment
- Items consumed in your business operations
Misuse triggers audits, penalties, and potential criminal charges. The line is clear: resale only.
5 Common Resale Certificate Mistakes
1. Using Outdated Certificates
Resale certificates don’t have formal expiration dates, but they become invalid when business circumstances change. Changed your business name? Moved locations? New ownership? You need updated certificates. Best practice: refresh certificates every 3-4 years even without changes.
2. Incomplete Form Fields
Missing information invalidates certificates. Every field on Form G-17 matters: seller details, your GET number, business description, transaction type, authorized signature. Sellers should refuse incomplete certificates because accepting them creates liability.
3. Incorrect GET License Numbers
The format matters: GE-XXX-XXX-XXXX-XX. Transposed digits or wrong format? The certificate fails verification. Double-check before submitting to suppliers.
4. Mixing Personal and Business Purchases
That office chair for your home workspace? Not eligible. The laptop you’ll use 50% for personal tasks? Not eligible. Resale certificates apply exclusively to inventory you’ll resell. Using them for business operations or personal purchases is fraud, regardless of intent.
5. Failing to Update After Business Changes
Sold your business? The new owner can’t use your old certificates. Switched from sole proprietorship to LLC? New entity, new certificates required. Changed your legal business name? Update everywhere. Each scenario requires notifying suppliers with new certificates reflecting current information.
For Sellers: Accepting Resale Certificates
If you’re on the receiving end of resale certificates, you carry responsibility and liability too.
When to Accept Certificates
Accept properly completed Form G-17 certificates when selling goods to licensed resellers. You’re operating on good faith, trusting the buyer genuinely intends to resell the items. Check that:
- All fields are complete
- The GET license number is properly formatted
- The business description matches the products being purchased
- An authorized person signed and dated the form
When to Refuse Certificates
Red flags demanding refusal:
- Incomplete or missing information
- Products clearly not matching the buyer’s stated business (a restaurant buying construction equipment, for example)
- Suspicious circumstances suggesting personal use
- Invalid or improperly formatted GET numbers
Your Retention Obligations
Keep every resale certificate you accept. These documents prove why you charged the reduced 0.5% rate instead of full GET. During audits, the burden of proof falls on you as the seller. No certificate on file? You’re liable for the tax difference plus penalties.
Store certificates securely with:
- Copies of all accepted Form G-17s
- Written revocation notices from buyers
- Documentation segregating different GET rate transactions
Hawaii doesn’t specify retention periods, but follow the three-year minimum federal guideline. Many businesses keep certificates indefinitely. Storage is cheap; audit penalties aren’t.
Seller Liability
Accept an invalid certificate and you’re on the hook. If the Hawaii Department of Taxation determines a buyer wasn’t entitled to the reduced rate, they’ll assess you (the seller) for the additional tax, plus interest and penalties. Your only defense is a properly completed certificate accepted in good faith. “I thought it looked okay” won’t cut it.
Related Hawaii Resale Forms
Form G-17 covers most resale scenarios, but specialized situations require different forms:
- Form G-18: Resale Certificate General Form 2, for manufacturers incorporating purchased materials into products for resale, or contractors incorporating materials into construction projects
- Form G-19: Resale Certificate Special Form, specifically for construction projects requiring building permits, issued on a per-project basis
Using the correct form matters. Contractors, pay attention: your resale certificate needs differ from standard retailers.
Record-Keeping That Protects You
Hawaii’s tax authorities expect meticulous documentation. Here’s what to maintain:
Sellers Must Keep:
- All resale certificates (Form G-17) from purchasers
- Revocation notices
- Records segregating income taxed at different rates
Purchasers Must Keep:
- Copies of all issued certificates
- Related notices and correspondence
While Hawaii law doesn’t mandate a specific retention period, federal guidelines recommend three years minimum. When audits happen, proper documentation is your shield.
The Cost of Getting It Wrong
Hawaii doesn’t mess around with tax compliance violations.
Civil Penalties
Operating without a GET license brings civil fines from $500 to $2,500 per violation, plus cease-and-desist orders. Late filing triggers 5% monthly penalties on unpaid taxes, maxing at 25%. Interest accrues at 2/3 of 1% monthly. Fraud cases? Penalties hit 50% of the underpayment.
Criminal Consequences
Operating without proper licensing can result in criminal charges: fines up to $1,000 or imprisonment for up to one year. Willfully failing to remit collected GET taxes is embezzlement of state property, punishable by fines exceeding five times the embezzled amount or up to ten years imprisonment.
These aren’t theoretical penalties. Hawaii enforces them.
How HOST Eliminates the Complexity
Navigating Hawaii’s GET system while managing resale certificates creates compliance nightmares. Mistakes cost money. Hands Off Sales Tax (HOST) handles everything:
ResaleCertify generates valid Hawaii resale certificates automatically. Input your business details and download certificates for all your suppliers. No cap, no confusion.
Sales Tax Registration assistance obtains your GET license and handles state communications.
Compliance Assurance ensures certificates meet Hawaii regulations, minimizing audit risks while reducing administrative burdens.
Audit Support provides expert guidance when tax authorities come calling.
With HOST, you focus on growth. We handle the tax complexities.
Ready to Simplify Your Hawaii Tax Compliance?
Obtaining and using resale certificates correctly is essential for minimizing tax burdens under Hawaii’s GET system. Proper compliance, accurate records, and strategic certificate management keep you on the right side of regulations.
Contact HOST today for a consultation. Let the experts handle your sales tax needs while you concentrate on what matters: running your business.
Frequently Asked Questions
What is a resale certificate in Hawaii?
Form G-17 allows businesses to purchase inventory at 0.5% GET instead of the standard 4% (or 4.5% in Honolulu). It prevents tax pyramiding by ensuring GET applies only at the final consumer sale.
Can I get a full GET exemption with a resale certificate?
Yes, in specific cases. Purchasing originally imported goods for wholesale resale qualifies for 0% GET under §237-29.55. Goods purchased for resale outside Hawaii also qualify for full exemption.
Who qualifies for a resale certificate in Hawaii?
Retailers, wholesalers, manufacturers, and producers purchasing goods for resale. Both in-state and out-of-state businesses must hold a valid Hawaii GET license.
How do I obtain a resale certificate in Hawaii?
First, register for a GET license through Hawaii Tax Online or mail Form BB-1 with a $20 fee. Once licensed, complete Form G-17 for your suppliers.
Can out-of-state businesses use their home state’s resale certificate in Hawaii?
No. Hawaii doesn’t recognize out-of-state resale certificates. Out-of-state businesses must register for a Hawaii GET license and provide Hawaii Form G-17.
Do resale certificates expire in Hawaii?
Certificates have no formal expiration date but become invalid when business circumstances change (name, location, ownership). Best practice: refresh every 3-4 years.
What happens if I misuse a resale certificate?
Civil fines range from $500 to $2,500 per violation, plus 5% monthly tax penalties (max 25%). Criminal charges include fines up to $1,000 or imprisonment. Willful violations involving collected taxes carry embezzlement penalties.
What’s the difference between Form G-17, G-18, and G-19?
Form G-17 covers general resale transactions. Form G-18 is for manufacturers and contractors incorporating materials into products or construction. Form G-19 is specifically for construction projects requiring building permits.
As a seller, what happens if I accept an invalid resale certificate?
You’re liable for the GET difference, plus penalties and interest. Your only defense is a properly completed certificate accepted in good faith. Keep meticulous records.
