If your business sells physical products or certain types of services, you will need to collect and pay sales tax. In Hawaii, the first step isvisit ...
How to Get a Resale Certificate in Hawaii
Written by: Carolyn Young
Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on July 4, 2022
Updated on May 22, 2023
If you have recently launched or are planning to launch a business that will sell products or services in Hawaii, you may want to get a resale certificate, or several of them, before you start doing business, as this can save you a lot of time and money.
It’s a relatively simple process, as detailed in this step-by-step guide.
What is a Resale Certificate?
If your business has a valid resale certificate, you can buy goods from a wholesaler without paying Hawaii sales tax, though you may pay a use tax. In Hawaii, instead of a sales tax, there is an excise tax. The difference is that tax is imposed on the seller of goods on each sale, which they can pass on to the consumer if the consumer agrees to pay it.
In Hawaii, the resale certificate lowers the tax on goods purchased for resale from 4% to .5%. Depending on the size of your business, this can save you tens of thousands of dollars each year.
The catch is that whenever you do use a resale certificate to purchase goods, you are legally bound to resell those items and collect sales tax when you do so. If you do not resell those items, or fail to collect sales tax, the punishment could be liability for the additional tax on those items.
Keep in mind, each resale certificate, also known as a resale license, applies to a single vendor. This means you’ll need a resale certificate for each one of your vendors.
You cannot use a resale certificate to buy items you do not intend to resell, such as a new computer for your business. This would be tax fraud, a felony offense. You are only able to buy items tax-exempt if you are going to collect sales tax on them later.
Not all wholesalers will accept resale certificates, nor do they have to. They may choose not to because of the risk of expired or false certificates, which would put the wholesaler on the hook for the sales tax.
How to Apply for a Resale Certificate in Hawaii
You’ll need to obtain the blank resale certificate from the Hawaii Tax Department. The form is not filed with the department. You’ll simply present a completed certificate to each of your vendors.
In a few states, a seller’s permit, or sales tax permit, also serves as a resale certificate that applies to all vendors. But in most states, including Hawaii, you’ll need a seller’s permit as well as resale certificates for each of your vendors.
The seller’s permit identifies you with your state as a collector of sales tax. If you sell tangible personal property or goods you are required to have a sales tax permit. In some states, even a service provider like a lawyer is required to have a sales tax permit and collect state sales tax.
The resale certificate applies to items that you buy for resale, or for parts that you buy to manufacture something for sale.
How to Fill out the Hawaii Certificate of Resale
In Hawaii, the tax department handles the issuance of resale certificates. Start by visiting the website, then follow these simple steps:
- The link provided will take you to the fillable PDF of the form.
- Fill in the seller’s name and address, and the date.
- Fill in your Hawaii tax ID number and the nature of your business.
- Select whether the items purchased will be sold at retail or wholesale.
- Fill in your business name, address and sign the form, and file it in your records.
Again, you do not file the form with your state. You’ll simply present it to your vendor and keep a copy for your records.
Does a Hawaii Resale Certificate Expire?
In Hawaii, resale certificates don’t expire. They can only be revoked in writing by the purchaser.
Resale certificates can be a bit of a hassle, but in Hawaii, they are an absolute necessity. So take the time to get certificates for each of your vendors to ensure full compliance with your state’s tax regulations.
How to Get a Resale Certificate in Hawaii
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