How to handle Hawaii State General Excise Tax in Design Manager

Modified on: 2017-09-22 13:51:27 -0400


The Hawaii general excise tax is imposed on the business instead of on the customer. Rather than merely acting as tax collectors, businesses are themselves taxed on their income. The general excise tax, therefore, is considered to be an expense which businesses incur in the normal course of doing business in Hawaii, along with other expenses such as labor costs, utility bills, supplies, cost of inventory, and the like. The general excise tax is levied on gross income from almost all types of business activities. These include sales of tangible personal property at both wholesale and retail, services, contracting, commissions, interest, lease or rental activities, and more. The general excise tax rate varies depending on the business activity.

Since the excise tax is not a sales tax and is paid like an income tax, there is no law requiring the Design Firm to report it on Proposals or Invoices to the client.  For this reason, Design Manager recommends increasing the markup applied to goods in order for the firm to recover the tax.

When the vendor charges the tax to the Design Firms it should simply be viewed as increased cost of the merchandise or services being purchased.  Some vendors will show the tax broken out on their invoices and some will bury the tax in the cost, both ways are legal.  When the tax is shown separately it should be divided amongst the various items that are being paid for.  The best version of Design Manager to use in Hawaii and when this occurs is Design Manager Pro 7.0.  In Design Manager Pro 7.0 the tax may be added to the cost of the merchandise by using the distribute function on the Enter Vendor Invoice Window.  Using the distribute function, the operator can enter the total amount of tax and tell the software to distribute the cost in a weighted manner among the various items being paid for.  For other versions of Design Manager the tax must be manually added to the cost of each item.  For example if a vendor invoice consists of two items, one for $100.00 and one for $50.00 and in the footer the vendor adds .5% excise tax so that the invoice total is $150.00 plus .75 for a total bill of $150.75.  This tax should be added to each item, so after entering the PO number, edit each item and change the $100.00 item to be 100.50 and the $50.00 item to be $50.25.

For more information, see:

http://www.state.hi.us/tax/taxfacts/tf96-01.pdf




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