Treating the GET like a sales tax that can be ignored or simply passed to customers. The GET is imposed ON the business's gross income: it hits service revenue, it is owed in loss years, and it applies even though the S corporation pays no Hawaii income tax. An S corp with $300,000 of Honolulu service revenue owes roughly $13,500 in GET at the 4.5% combined rate before any income tax analysis — a cost that dwarfs the federal payroll-tax savings the S election was chosen for. The second trap is the PTE election: it is irrevocable for the year AND requires electronic filing, so a paper-filed return can cancel it outright.
Recognized automaticallyPTET available
S-corp election in Hawaii
In short
No entity-level income tax on ordinary S corp income, but the Hawaii General Excise Tax (GET) applies to gross income regardless of entity type.
Does Hawaii recognize the federal S election?
Explicit and unambiguous in Hawaii's own instructions: 'A valid S corporation election for federal purposes is automatically effective for Hawaii income purposes without a separate election.' File Form N-35 once the IRS has notified the corporation that its election was accepted; a copy of the accepted federal Form 2553 need not be submitted unless the Department requests it. If the S election is not in effect for the year, file Form N-30 instead. S corporations that are financial corporations under HRS chapter 241 may not file Form N-35 and must file Form F-1 franchise tax return instead. An S corporation cannot be part of a unitary group with C corporations.
Tax the entity still owes
The GET is the dominant Hawaii cost and it is a GROSS receipts tax — not a sales tax and not an income tax. Rates: 4% on retailing, services and most other activities; 0.5% on wholesaling, manufacturing, producing, wholesale services and use tax on imports for resale; 0.15% on insurance commissions. Counties may add a 0.5% surcharge on the 4% rate only: City and County of Honolulu 0.5% (1/1/2007–12/31/2030), Kauai 0.5% (1/1/2019–12/31/2030), Hawaii County 0.5% (1/1/2020–12/31/2030), Maui 0.5% (1/1/2024–12/31/2030). The maximum visible pass-on rate where a surcharge applies is 4.7120%. GET is levied on the business, is owed in loss years, and applies whether or not the entity owes income tax. Built-in gains and excess net passive income are taxed at the entity level. S corps with nonresident shareholders must obtain and file Schedule NS agreements from each nonresident shareholder.
Registering for payroll
Register with the Hawaii Department of Taxation through Hawaii Tax Online (hitax.hawaii.gov) for both an income tax withholding account and a GET license (Form BB-1). Register with the Hawaii Department of Labor and Industrial Relations (DLIR) for unemployment insurance and for Temporary Disability Insurance (TDI). Hawaii additionally mandates employer-provided health coverage under the Prepaid Health Care Act for employees working 20 or more hours per week — a real cost that catches new S corp owners. Withholding uses Form HW.
Annual filings
Form N-35 with tax due in full on or before the 20th day of the 4th month after the end of the tax year (April 20 for calendar-year filers) — note Hawaii uses the 20th, not the 15th. Amounts due on attached Forms N-4 and Schedules PTE are due at the same time. Estimated payments on Form N-201V in four installments due the 20th day of the 4th, 6th and 9th months and the 20th day of the 1st month after year end, required if the expected liability is $500 or more OR if the entity is an electing PTE. GET returns (periodic Form G-45 and annual reconciliation Form G-49). Withholding returns HW-14 and annual HW-3. Annual report with the DCCA Business Registration Division.
Pass-through entity tax
Yes. S corporations may make a yearly IRREVOCABLE election to pay tax at the PTE level, and the election binds all shareholders who are qualified members. Electing PTEs are liable for income tax on the sum of all qualified members' distributive shares multiplied by 9%, with no separate tax rate for capital gains. The election is made on Form N-362E with all required signatures, attached to Form N-35 along with Schedule PTE. Shareholders claim the resulting credit on Form N-362 (reported on line 16m of Schedules K and K-1). Compliance trap: an electing PTE MUST file Form N-35 and all schedules ELECTRONICALLY for taxable years beginning after December 31, 2022 unless it obtains a waiver on Form L-110 — failure to file electronically and/or submit an electronic funds transfer may result in CANCELLATION of the PTE election.
The mistake owners make most often in Hawaii
Filing your federal Form 2553
Businesses operating in Hawaii send Form 2553 to the IRS Ogden service center — fax 855-214-7520. Full address and filing checklist for Hawaii.
Frequently asked questions
Does Hawaii require a separate S-corporation election?
No. Hawaii does not require a separate state election. Explicit and unambiguous in Hawaii's own instructions: 'A valid S corporation election for federal purposes is automatically effective for Hawaii income purposes without a separate election.' File Form N-35 once the IRS has notified the corporation that its election was…
What tax does an S corporation pay in Hawaii?
No entity-level income tax on ordinary S corp income, but the Hawaii General Excise Tax (GET) applies to gross income regardless of entity type.
Where do I file Form 2553 from Hawaii?
With the IRS Ogden service center. Fax 855-214-7520, or mail to Department of the Treasury, Internal Revenue Service, Ogden, UT 84201.
What is the most common S-corp mistake in Hawaii?
Treating the GET like a sales tax that can be ignored or simply passed to customers. The GET is imposed ON the business's gross income: it hits service revenue, it is owed in loss years, and it applies even though the S corporation pays no Hawaii income tax. An S corp with $300,000 of Honolulu service revenue owes roughly $13,500 in GET at the 4.5% combined rate before any income tax analysis — a cost that dwarfs the federal payroll-tax savings the S election was chosen for. The second trap is the PTE election: it is irrevocable for the year AND requires electronic filing, so a paper-filed return can cancel it outright.
Compare with other states: Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky.
Sources
File your Form 2553 correctly
Scorply completes your federal election and includes a Hawaii guide in your packet, so you know exactly what else you owe here.
Start my Form 2553Researched from official Hawaii sources and verified July 30, 2026. State tax rules change. This is general information, not tax advice — confirm with the state or a CPA before you rely on it.