Hawaii’s marketplace facilitator sales tax law, explained
by February 2, 2024
Please note: This blog was originally published in 2020. It’s since been updated for accuracy and comprehensiveness.
The state of Hawaii requires marketplaces to collect sales tax on behalf of sellers on online marketplaces like Amazon, Walmart, Etsy, and eBay.
This means that if you sell on a platform like Amazon, then Amazon will collect sales tax from your Hawaii buyers on your behalf, and remit it to the state.
But as usual, there are always a few wrinkles here when it comes to e-commerce sales tax.
This post will explain what online sellers need to know about the Hawaii marketplace facilitator law, and answer your frequently asked questions.
Overview of the Hawaii marketplace facilitator law
Hawaii’s marketplace facilitator law states that marketplace facilitators who generate $100,000 or more in sales, or generate sales in 200 or more separate transactions, collect sales tax (or in Hawaii’s case “General Excise Tax”) on behalf of third-party sellers on sales made through that marketplace.
Quick facts about the Hawaii marketplace facilitator law
- Effective date: January 1, 2020
- Threshold: Hawaii considers vendors who make more than $100,000 in sales annually or more than 200 transactions in the state in the previous or current calendar year to have economic nexus. In Hawaii, the marketplace facilitators shall be deemed the seller and are responsible for collecting sales tax (Hawaii calls this “General Excise Tax”) on behalf of their sellers as well as out-of-state marketplace facilitators that have economic nexus in Hawaii.
- State law information: Read the full text of the Hawaii marketplace facilitator law.
- Marketplaces that have adopted this law:
Frequently asked questions about marketplace facilitator laws
What exactly is a marketplace facilitator in Hawaii?
Hawaii law defines marketplace facilitators as “any person who sells or assists in the sale of tangible personal property, intangible property, or services on behalf of another seller by:
(1) Providing a forum, whether physical or electronic, in which sellers list or advertise tangible personal property, intangible property, or services for sale; and
(2) Collecting payment from the purchaser, either directly or indirectly through an agreement with a third party.”
Online sales platforms like Amazon and eBay are considered marketplace facilitators under Hawaii law.
A software like WooCommerce or Shopify that allows online sellers to build and manage their own stores would not be considered a marketplace facilitator.
Does this mean I can stop collecting Hawaii sales tax?
It depends. Every business’s sales tax situation is unique to that business.
Let’s look at a couple of common scenarios for businesses who have sales tax nexus in Hawaii.
Example #1: You only make sales on online marketplaces.
In this example, you only sell on Amazon and eBay. Because Amazon and eBay are both now collecting sales tax from buyers on your behalf, you are not required to collect sales tax from your buyers. (However, you may still be required to file periodic sales tax returns. See “Does this mean I can cancel my Hawaii sales tax permit?” below.)
Example #2: You sell on online marketplaces and your own online store and/or brick and mortar store.
In this case, you’d still be required to collect sales tax from buyers who purchase from you through your own online store (for example, via your WooCommerce or Ecwid store). And you would still be required to collect sales tax from your brick and mortar customers.
Marketplace facilitator laws only cover marketplaces. The state still requires that merchants collect sales tax from buyers via sales channels where the marketplace facilitator laws do not apply.
Does this mean I can cancel my Hawaii sales tax permit?
No.
Because Hawaii’s tax is a “general excise tax” and not a true sales tax, the state still requires any seller with nexus in the state to remain registered for the General Excise Tax. They require that sellers charge the wholesale sales tax rate to the marketplace facilitator, and still remit that amount to the state.
Do I still need to file a Hawaii sales tax return?
If you are registered to collect sales tax in Hawaii (i.e. you have an active Hawaii sales tax permit) then the state still requires that you file sales tax returns.
If you only make sales via marketplaces, and all of your marketplaces collect sales tax from buyers on your behalf, then you may only be required to file a “zero return.” (This is a return showing that you do not have any sales tax to remit to the state.)
If you no longer have any sales tax to remit to the state of Hawaii, we recommend checking directly with the state to determine if you can cancel your sales tax registration.
Be cautious here. If you are registered for a sales tax permit and do not file, the state can assess penalties even though you don’t have any sales tax to remit! We have, unfortunately, talked to too many sellers who have found this out the hard way when a tax penalty bill arrives.
What do I do with any Hawaii sales tax I have already collected?
If you have already collected Hawaii sales tax from buyers, it is vital that you remit that amount to the state. The only way to get in serious criminal trouble in sales tax is to collect sales tax from buyers on the state’s behalf but keep it in your own pocket.
Example:
Let’s say you sell on Amazon and Hawaii requires you to file and remit sales tax quarterly. Though Amazon began collecting sales tax on your behalf on January 1, if you have any sales tax in your bank account that you collected from Q4 2019, you will still need to remit that to Hawaii’s Department of Taxation or face a penalty.
Does TaxJar handle this for me?
Yes.
TaxJar AutoFile handles Hawaii sales tax automatically
TaxJar AutoFile automatically compiles your sales tax data/general excise tax the way the state of Hawaii wants it filed. For example, many states, Hawaii included, want sellers to break down their sales tax collected interstate (sales originating in Hawaii sent to another state) and intrastate (sales made from Hawaii to Hawaii.)
If a marketplace has collected sales tax on your behalf, TaxJar reports that directly to the state so that the state is aware you have met your sales tax obligations.
If you currently AutoFile your Hawaii sales tax returns, you don’t need to do a thing. It’s handled!
TaxJar reports give you all the info you need to file manually
If you prefer to file manually, your TaxJar Reports also reflect what the Hawaii Department of Revenue wants to see on your tax return.
Also don’t worry that you will double pay. TaxJar accounts for sales tax collected on your behalf, and only shows you the amount you owe to the state out of your pocket.
Further reading on Hawaii sales tax and marketplace facilitator laws:
- TaxJar’s Marketplace Facilitator FAQ
- State by State: Marketplace Facilitator Laws Explained
- Hawaii Sales Tax Guide for Businesses
