Hawaii, the Aloha State, is an island chain in the southern Pacific some 2,500 miles west of California, and is the only U.S. state that is not a part of North America. Hawaii has little industry or natural resource production, and relies on tourism for most of its income. Hawaii has a state income tax collected and administered by the State of Hawaii Department of Taxation, as well as a 4-percent-plus state excise tax.
Hawaii Stae Income Tax
The state of Hawaii does have a state income tax. Hawaii's income tax system is structured similarly to the U.S. federal income tax system (with deductions, exemptions and so forth), and is a progressive tax scheme with the lowest rate at 1.4 percent for the first $2,000 of taxable income, and the highest rate at 8.25 percent for taxable income over $40,000.
Hawaii Excise (Sales) Tax
Hawaii uses an excise tax system rather than a direct sales tax system. This legal difference means that all individuals and businesses, even nonprofit organizations and churches, must pay the tax on all nonexempt goods or services purchased. Technically the tax is levied on the businesses that sell the good and services, but in practice the businesses of course pass on the cost to their customers, resulting in the same effect as a sales tax. So called "double taxation" is legally allowed in many cases with an excise tax, so the effective tax rate is often 4.71 percent.
Hawaii Hotel and Rental Vehicle Tax
Hawaii levies a 6 percent transient accommodation tax on both hotel and motel rooms as well as a $3 a day rental motor vehicle surcharge, plus a $.40 to $1.10 a day vehicle registration fee.
The state of Hawaii levies a 17-cent-per-gallon tax on both diesel and regular gasoline. A 4 percent sales tax also applies to all diesel or gas fuel sales.