Hawaii Computer, Software, and SaaS Tax Guide

Prepared by Sales Tax Helper

Table of Contents

1. Introduction
2. Nexus Considerations
3. General Rules and Compliance Considerations
4. Specific Exemptions
5. Sourcing Rules
6. Audit Considerations
7. Voluntary Disclosure Agreements (VDAs)
8. Conclusion
9. References & Resources

1. Introduction

For software companies, SaaS providers, and technology firms conducting business in Hawaii,
the state's tax system presents unique challenges. Unlike many states that impose sales and use taxes, Hawaii implements a General Excise Tax (GET) system that applies more broadly to
almost all business activities. Hawaii's tax treatment of software and technology-related services depends on multiple factors, including whether the business has nexus with the state, the nature of the transaction, and whether any exemptions apply.

Purpose of This Guide

This guide is designed to help businesses navigate Hawaii's General Excise Tax rules related to
software and technology services. It focuses on:

• Nexus Considerations: Understanding when businesses must register and collect Hawaii
  GET due to physical or economic presence.
• Taxability of Software & Services: Clarifying the tax treatment of prewritten vs. custom
  software, cloud computing services, and related technology offerings under Hawaii's
  GET system.
• Sourcing Rules: Determining how and where transactions are taxed based on customer
  location and method of software delivery.
• Audit Considerations: Identifying common tax audit triggers and best practices for
  compliance.
• Voluntary Disclosure Agreements (VDAs): Explaining the process for businesses to
  rectify past noncompliance while mitigating penalties and limiting back-tax liability.

Why This Matters for Technology Companies

Hawaii's General Excise Tax laws impact software companies, SaaS providers, and technology
firms in multiple ways:

• GET Obligations: Businesses that sell software or related services to Hawaii customers
  may have a duty to collect and remit Hawaii GET, which applies to gross receipts from
  virtually all business activities in the state.
• Cloud Computing & SaaS Complexity: Hawaii treats electronically delivered software
  and cloud-based services differently than many other states, applying GET to these digital
  products.
• Compliance Risks: Failure to correctly assess and collect GET can result in significant
  penalties, interest, and extended audit exposure.

This guide will walk through Hawaii's specific tax rules governing software, SaaS, and
technology-related services while referencing applicable statutes, administrative rules, and
Hawaii Department of Taxation guidance. Throughout the guide, official Hawaii Department of
Taxation sources will be linked for further reference.

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