Business Taxes Payable by Your Hawaii LLC
Business taxes are a fact of life, and your HI LLC will need to pay a variety of taxes to both the federal and Hawaii governments. We’ll cover all the main taxes in Hawaii including self-employment, payroll, federal, Hawaii state tax and Hawaii sales tax.
If you want help with your taxes, Incfile provides a complete Business Tax Filing service.
How Your Hawaii LLC Will Be Taxed
The profits of a Hawaii LLC are not taxed at the business level like those of C Corporations. Instead, taxes for a Hawaii LLC work as follows:
- Hawaii LLC owners pay self-employment tax on business profits.
- Hawaii LLC owners pay HI state tax on any profits, less state allowances or deductions.
- All LLC owners pay federal income tax on any profits less federal allowances or deductions.
- Some HI LLCs pay Hawaii sales tax on products.
- Employers pay payroll tax on any salaries they pay to employees.
- Employees pay federal, state and payroll tax on their earnings.
Items 1, 2 and 3 are taxed as “pass-through” income for any LLC owners, managers or members who receive profits from the business. Any profits are reported on federal and Hawaii personal tax returns, and that’s where you will pay those taxes.
Hawaii State Business Taxes
There are two main types of tax that you will pay to the Hawaii Department of Taxation: Hawaii state income tax and Hawaii state sales tax.
Hawaii State Income Tax Payable on LLC Earnings
As a Hawaii business owner, you will need to pay HI state tax on any money you pay to yourself. These earnings flow through to your personal tax return, which is where you will pay Hawaii income tax. You will be taxed at the standard rates for Hawaii state taxes, and you will also get to apply regular allowances and deductions.
Any salaried employees will also need to pay personal Hawaii state taxes.
The Hawaii state tax rates are 1.4 to 8.25 percent, depending on earnings.
Get details on the Hawaii state tax here.
Hawaii Sales Taxes for LLCs
If you sell physical products or certain types of services, you may need to collect sales tax (also known as sales and use tax) and then pay it to the HI Department of Taxation. Hawaii sales tax is collected at the point of purchase. Hawaii sales tax rates do vary depending on the region, county or city where you are located.
You will typically need to collect Hawaii sales tax on:
- Tangible, personal property and goods that you sell like furniture, cars, electronics, appliances, books, raw materials, etc.
- Certain services that your Hawaii business might provide
Most states do not levy sales tax on goods that are considered necessities, like food, medications, clothing or gas.
Get details on the Hawaii sales tax here.
Sales Tax Rates in Hawaii
Sales tax rates do vary between states, counties and cities. Typically, the state will set a base sales tax rate, then specific counties and cities may levy small additional sales tax amounts on top of that.
Federal Taxes for Your Hawaii LLC: Self-Employment and Income Taxes
There are a couple different federal taxes that every LLC will need to pay, including Hawaii LLCs. These are self-employment tax and federal income tax, which are taxed as “pass-through” income via your tax return forms.
Hawaii LLC Federal Self-Employment Tax
All Hawaii LLC business members or managers who take profits out of the LLC will need to pay self-employment tax. This tax is also known as FICA, Social Security or Medicare tax. It applies to all the earnings you withdraw from your Hawaii business. The current self-employment tax rate is 15.3 percent.
You will be able to deduct your business expenses from your income when working out how much self-employment tax you owe. Here are some examples of how much self-employment tax you may need to pay, depending on your earnings:
- On profits of $60,000, you would pay self-employment tax of $9,180.
- On profits of $90,000, you would pay self-employment tax of $13,770.
- On profits of $100,000, you would pay self-employment tax of $15,300.
- On profits of $140,000, you would pay self-employment tax of $21,420.
- On profits of $160,000, you would pay self-employment tax of $24,480.
Pay Less Self-Employment Tax by Treating Your Hawaii LLC as an S Corporation
The Internal Revenue Service allows LLCs to ask to be treated as an S Corporation for tax purposes. This can help you reduce the amount of self-employment tax that you pay by declaring some of your income as salary and other income as distributions or withdrawals.
You can do this by making an “S Corporation Tax Election” with the IRS using a form known as Form 2553. We can file your Form 2553 with the IRS on your behalf.
Incfile Form 2553 S Corporation Tax Election for an LLC service
Speak to your accountant for more information on reducing your Hawaii LLC self-employment tax through an S Corporation tax election.
Hawaii LLC Federal Income Tax
You must also pay regular federal income tax on any earnings you take out of your Hawaii LLC. The amount of income tax you pay depends on your earnings, current income tax brackets, deductions and how you file.
You only pay federal income tax on your Hawaii LLC profits that you take out of the business, less certain deductions and allowances. This includes your tax-free amount, plus LLC business expenses and other deductions for areas such as healthcare and some retirement plans. Speak to your accountant for more information.
Employee and Employer Taxes for Your Hawaii LLC
If you pay employees, there are some slightly different tax implications. Speak to your accountant to get clear guidance for your own unique situation.
Hawaii LLC Employer Payroll Tax Withholding
All employers must collect and withhold payroll tax from their employees when they receive their salaries. You would normally withhold 7.65 percent of the taxable salary that you pay to your employees.
Hawaii LLC Federal and State Tax Withholding
You may also choose to withhold federal and Hawaii state income tax on the wages you pay to employees. Speak to your accountant for more information.
Employees May Need to File Tax Returns
Regardless of whether you withhold federal and Hawaii state income tax, your employees may need to file their own tax returns.
Hawaii LLC Employee Insurance and Other Requirements
You may also need to pay insurance for any employees, like employee compensation insurance or unemployment tax. There will also be other requirements you have for employees.
Get more requirements from the Hawaii Department of Labor and Industrial Relations website.
Other Taxes and Duties for Your Hawaii LLC
Depending on the industry you are in, your Hawaii LLC may be liable for certain other taxes and duties. For example, if you sell gasoline you may need to pay a tax on any fuel you sell. Likewise, if you import or export goods you may need to pay certain duties. Speak to your accountant about any other taxes you may need to withhold or pay.
Estimated Taxes for Your Hawaii LLC
Most Hawaii LLCs will need to pay estimated taxes throughout the year, depending on the amount of income and profit you expect to make. The most common types of estimated tax are:
- Federal income tax
- Federal self-employment tax
- Hawaii state tax
Most Hawaii LLCs will pay estimated taxes four times a year. Speak to your accountant for more information.
FAQs on Hawaii LLC Business Taxes
Does Hawaii Have Sales Tax?
Yes. Hawaii does have a sales tax, which may vary among cities and counties.
Does Hawaii Have a State Tax?
Yes. Hawaii does have a general state income tax. You can find more information above.
Do I Need to Pay Estimated Taxes?
Yes. In most cases you must pay estimated taxes on your Hawaii tax, federal income tax and self-employment tax. Speak to your accountant for more information.