When a business purchases inventory to resell, it can often do so without paying sales tax. To do so, the retailer needs to provide a Hawaii Certificate of Resale (also referred to as a Resale Certificate) to their vendor.
Learn how the Hawaii Certificate of Resale works, how to get one, and more.
How Does a Hawaii Certificate of Resale Work?
When retailers purchase products to resell, they often don’t pay sales tax to the supplier. The sales tax will still be paid, but instead of the retailer paying the state sales tax, the retailer charges sales tax to their customer on the final value of the merchandise.
For instance, when a souvenir shop in Hawaii purchases products such as jewelry, crafts, or clothing to sell in their store, by having a Certificate of Resale, the shop owner won’t often pay sales tax on purchasing its inventory. When a tourist purchases a souvenir, the retailer will charge sales tax to the customer based on the item’s full price. Then, typically, at the end of the month, the shop owner will take all of the state sales taxes collected and send them to the Hawaii Department of Taxation.
It’s important to understand that the sales tax exemption is only intended for inventory that will be resold and not for the tax-free purchase of tangible personal property used in normal business operations, such as paper, pens, etc.
How To Fill Out the Hawaii Certificate of Resale (Form G-17)
Before a business starts selling products or providing taxable services, it must first get a Hawaii General Excise Tax License (sometimes referred to as a sales tax license or seller’s permit) from the Hawaii Department of Taxation. After registering for the license, the Hawaii Department of Taxation will issue a state tax identification number, which will be used to fill out the Certificate of Resale.
Step 1: Begin by downloading the Hawaii Certificate of Resale Form G-17
Step 2: Identify the name and address of the seller
Step 3: Enter the date the certificate was prepared
Step 4: Include the buyer’s Hawaii Tax Identification Number
Step 5: Describe the nature and character of the buyer’s business
Step 6: Indicate whether the purchases are for resale at retail or leases or resale at wholesale
Step 7: Enter the name, address, title, and signature of the buyer.
If, at any time, the percentage of purchases for resale changes, the certificate should be updated.
Hawaii Resale Certificate FAQs
How much does a Hawaii Certificate of Resale cost?
There is no cost for the Hawaii Certificate of Resale.
Does a Hawaii Certificate of Resale expire?
Hawaii resale certificates don’t expire; however, if the buyer’s information changes, the buyer should send a new certificate to their vendors.
Where do I file the Hawaii Certificate of Resale?
In Hawaii, the certificate is not filed with any government agency. Instead, it is kept by the seller (the business selling the merchandise to the reseller).
How often is the Hawaii General Excise Tax due?
Most new businesses are set up to file and pay sales and use tax monthly, but depending on the amount of tax collected, your business may have a different filing frequency.
Is a Certificate of Resale the same as a General Excise Tax License?
No – The General Excise Tax License and Certificate of Resale are commonly thought of as the same thing, but they are actually two separate documents. The General Excise Tax License allows a business to sell and collect sales tax from taxable products and services in the state, while the Certificate of Resale allows the retailer to make tax-exempt purchases for products they intend to resell.
These are two of several registrations your business may need. To learn more, check out our guide to Hawaii business licenses.
What steps should a business take to accept a resale certificate?
When a business is presented with a resale certificate, the seller has the burden of proof to verify that the buyer’s information is correct and to keep these records. Failing to verify this information may make the seller liable for paying Hawaii sales taxes.
Before accepting a resale certificate, a seller should:
– Review the resale certificate to make sure it is completely filled out.
Visit the Hawaii Tax Online page to verify that the purchaser’s Hawaii sales tax license is valid and active.
– Sellers are also responsible for examining the certificate and evaluating whether the goods sold are reasonably consistent with the purchaser’s line of business. For example, if the buyer’s business is a car dealership but wants to purchase office supplies tax-free, the seller should investigate further.
– Keep a file of resale certificates.
