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Planning for Those Additional Taxes and Fees When Traveling to Hawaii

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Updated April 09, 2013

When planning the budget for their trip, many visitors to Hawaii neglect to consider the additional taxes and fees that will be added to almost everything they do while on vacation.

While these added surcharges compare favorably to many other locations in the USA, visitors need to remember that they are calculated and added to what are already some of the country's highest daily hotel and car rental rates and to merchandise which in many cases is priced much higher than on the mainland. Therefore, these taxes and fees can add a significant amount to the bottom line for a trip.

Let's take a look at some of these extra charges as they stand today.

Hawaii GET - General Excise Tax

Unlike many states, Hawaii does not have a state sales tax. Instead, Hawaii has a general excise tax. As excellently explained in an article by Hawaii Civil Beat, "The General Excise Tax (GET) is levied against a business's gross receipts for the privilege of doing business in Hawaii. The majority of business activities are subject to a 4 percent tax. Wholesale transactions are subject to a 0.5 percent tax and insurance commissions are charged a 0.15 percent tax. Unlike a sales tax, the GET is levied on the seller and not the purchaser."

Where a sales tax is paid by the ultimate consumer, Hawaii's GET is assessed with each transaction as the product passes through the stream of commerce. By the time the product reaches the store where you, the traveler, make your purchase, the GET may have been paid and added to the cost of the product two or three times since the product arrived in Hawaii. The bottom line, is that many products which have been brought into Hawaii from the mainland are priced much higher by the final seller due to the amounts of the GET paid along the way.

Finally when you, the visitor, make your purchase, a final GET is assessed at the current rate of 4.712% on Oahu (where an additional 0.546% "County Tax" is added) and 4.166% on the other islands. The higher rate on Oahu is due to an additional surcharge for the new rail system which is under construction.

Also, unlike many sales tax situations, this GET is added for virtually everything you purchase in Hawaii, i.e. hotel rates, food, medical care and consumer products.

The good news, however, is that for visitors from states with high sales taxes, the Hawaii GET may seem like a bargain especially for items made or grown in Hawaii and purchased directly from the producer.

Hawaii Transient Accommodations Tax

For most visitors, the two biggest expenses on their trip are airfare and lodging, with lodging often being the larger of the two. In Hawaii all lodging is assessed the Hawaii Transient Accommodations Tax.

The transient accommodations tax is an amount added to the daily cost of your lodging. The current rate of this tax is 9.25% which is set to revert to 7.25% on June 30, 2015 unless the state legislature and governor agree to continue the current rate. In fact, however, Hawaii Governor Neil Abercrombie has proposed increasing the tax to 11.25%.

This tax is in addition to the GET which is also added to the cost of your lodging. In addition, many resorts charge their own daily activity or resort fee, a mandatory amount for added services such as free Wi-Fi, local phone calls, use of various facilities, in some instances parking etc. Most accommodations that do not charge a resort fee, charge separately for parking your rental car.

Let's take a look at an example of how these costs can quickly add up. If you are staying on Oahu in a hotel which charges $200 per night and has a $25 resort fee, you will pay: $200 for the room, $9.42 in GET, $18.50 for transient accommodations tax and $25 for resort fee or parking. Your total daily charge will not be $200 per night, but rather $252.92 or about $25% more than you were originally quoted for the room.

How does this compare to other locations? It varies. That same $200 room in New York City, where the hotel does not have a daily activity or resort fee, will cost, as of April 2013, about $233. Visitors to New York City pay city tax (4.5%), state tax (4%) transportation district surcharge (.375%), and hotel room occupancy tax ($2 + 5.875%).

Car Rental Surcharges

Coming from a large city on the East Coast where there is a high sales tax and high hotel occupancy tax, the Hawaii GET and Transient Accommodations Tax are pretty much equivalent to what I would expect to pay close to home. The one area that really bothers me when I visit Hawaii, is the added charges when I rent a car. Almost all visitors to Hawaii rent a car - especially those visiting the neighbor islands. It's really the only way, in most cases, to see all that Hawaii has to offer.

Rental car prices in Hawaii are high to begin with. Even a compact car is likely to cost you around $250 a week before you add the additional charges. At all rental locations those charges include the state general excise tax, state highway surcharge and vehicle registration fee. If you rent at the airport (as most visitors do), you will also pay a customer facility charge and an airport concession recovery tax.

Let's look at what you can expect actually to pay if you rent a compact car at the Honolulu International Airport for one week in 2013.

Compact Car Base Rate - $250.00
Hawaii State General Excise Tax including Oahu County Tax (4.712%)- $11.78
State Highway Surcharge ($3.00 per day) - $21.00
Vehicle Registration Fee ($0.35 - $1.45 per day) - $2.45 to $10.15
Customer Facility Charge ($4.50 per day) - $31.50
Airport Concession Recovery Tax (11.1%) - $27.75
Grand Total - $344.48 to $352.18

Your total cost for your rental car is over 37% higher than the base rate quoted.

The Bottom Line

As you have seen, there are many additional charges that you need to consider when planning your vacation in Hawaii. When planning your budget you should also consider setting aside an additional amount for tips and gratuities as we have discussed in our feature on tipping in Hawaii.

Some tour operators and booking sites will offer package deals which include airfare, hotel and rental car with all taxes, fees and gratuities included. If you decide to book these items on your own, you may be able to save come money, but you also need to include these various additional taxes, fees and additional charges that we have outlined here when calculating the actual cost of your trip.

In March 2013 it was widely reported that online travel sites such as Orbitz, Priceline, Travelocity and Expedia have been ordered to pay about $230 million in back taxes and penalties for failure to pay the State of Hawaii general excise tax for the past ten years.

The State is also appealing an earlier court order that these same companies did not owe Hawaii Transient Accommodations Tax on the portion of what they charge consumers for lodging which has not already been taxed. Depending on the outcome of these issues now before the courts, the amounts that these companies charge for lodging in Hawaii may soon see an increase.

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