Hawaii General Excise Tax (GET) Audit Protest

The situation

Aloha Creative Studio LLC is a digital marketing agency in Honolulu with 8 employees and $1.2M in annual billings. In February 2026 HDOT issued a Notice of Assessment: $34,800 in GET + $3,480 penalty + $2,200 interest = $40,480 total, covering 2021–2023. HDOT's theory: the agency collected GET from clients at 4.712% on marketing services, but for contracts with clients on the US mainland, HDOT says Aloha Creative applied the wrong rate, mainland services should have been invoiced at 4% (state only, no Honolulu surcharge) rather than 4.712%.

Aloha Creative has 30 days to request an informal conference with HDOT. A Hawaii tax attorney quoted $6,500 to "review the audit work papers and prepare the conference request."

What the owner doesn't know: The Honolulu County Surcharge (0.5%) applies to gross income "attributable to transactions occurring in the City and County of Honolulu." For services delivered to mainland clients, the GET surcharge attributability depends on WHERE the services were performed, and if Aloha's employees performed the work from their Honolulu office, the services MAY be attributable to Honolulu regardless of where the client received them. This is a genuinely contested technical question, and HDOT may actually be correct on part of the assessment, but the agency needs to review each engagement contract to determine where delivery occurred.

Who receives this

Hawaii businesses with multi-client service operations receiving HDOT GET audit assessments, particularly digital agencies, IT firms, consulting companies, and tourism-industry businesses with mixed Oahu/outer island/mainland client bases where surcharge rate attributability is disputed.

Why the agency will not advise you

Hawaii's unique GET structure (taxes all gross receipts including services at rates that vary by client/transaction location) creates genuine complexity. HDOT cannot advise businesses on how to contest its own assessments. Hawaii Tax Online is compliance-only. No self-serve GET protest navigator found.

Key facts, with sources

• Hawaii's General Excise Tax (GET), administered under HRS Chapter 237, is a privilege tax imposed on the gross income of businesses operating in Hawaii. Unlike most state sales taxes (which tax the buyer on retail purchases of tangible personal property), Hawaii's GET taxes the SELLER on ALL gross receipts from business, including services, retail sales, wholesale sales, and rentals. The standard rate is 4% (retail and services); 0.5% for wholesale transactions (sales for resale to licensed GET dealers); and an additional 0.5% Honolulu County Surcharge applies to activities attributable to Oahu, bringing the Oahu rate to 4.712% (inclusive rate passed on to customers). Hawaii Department of Taxation (HDOT) audits GET compliance; when HDOT issues a Notice of Deficiency or Proposed Assessment, the taxpayer has 30 days to request an informal conference. If the informal conference does not resolve the dispute, the taxpayer can appeal to the Board of Review (administrative) or directly to the Tax Appeal Court (a specialized circuit court under HRS § 232). Hawaii Tax Online (HTO) is HDOT's portal for filing, payment, and account management, not audit protest strategy. Common GET audit findings: (1) failure to collect GET from customers on service receipts; (2) wholesale rate (0.5%) applied when retail rate (4%) was required; (3) Oahu surcharge (0.5%) not applied to Honolulu-attributable transactions; (4) improper exemptions claimed (services to non-government customers claimed as government-exempt). Source: General Excise Tax (GET) Information — Hawaii Department of Taxation · Hawaii GET Audit Overview — Torkildson Law · Hawaii General Excise Tax Guide — VATabout

When to bring in a professional

Self-serve responses fit routine cases: clear facts, amounts a business can absorb, and a deadline still ahead of you. Bring in a licensed professional when the amount at stake is large relative to their fee, the facts are genuinely disputed, criminal exposure is possible, or the deadline has already passed. A short paid consultation to sanity-check your plan is often worth it even when you handle the filing yourself.

All sources for this guide

1. General Excise Tax (GET) Information — Hawaii Department of Taxation
2. Hawaii GET Audit Overview — Torkildson Law
3. Hawaii General Excise Tax Guide — VATabout