Hawaii GET tax for contractors: how the §237-13(3)(B) sub-deduction actually works

If you're running a Hawaii general contracting business and you've ever felt like your GET (General Excise Tax) bill was unreasonably large, this article is for you. There's a deduction in §237-13(3)(B) of the Hawaii Revised Statutes that lets you back out payments to subcontractors before the tax hits — but only if you handle it correctly.

I learned this the hard way. Here's the plain-English version.

What is GET?

Hawaii's General Excise Tax is the state's equivalent of a sales tax — except it taxes the SELLER on gross revenue, not the buyer on the price. The rate is 4.0% statewide, plus a 0.5% Honolulu county surcharge for work on Oahu. Total: 4.5% on Oahu, 4.0% on the neighbor islands.

Critically, it's a gross tax. If you invoice a client $100,000 for a job, you owe GET on $100,000 — not on your profit, not on your net. This is brutal for general contractors who pay 60-80% of their invoice straight back out to subs.

Enter §237-13(3)(B)

The statute lets a GC deduct the amount paid to subcontractors from the gross income subject to GET, IF the subs also paid GET on the same money. The intent is to avoid taxing the same dollar twice as it moves through the contracting chain.

In practice:

Without the deduction: $100,000 × 4.5% = $4,500 owed.

With the deduction: $40,000 × 4.5% = $1,800 owed.

That's $2,700 saved on a $100K job. On a year of 10 jobs, you're looking at $27K — real money.

What counts as a deductible sub payment?

The sub must:

If any of those conditions fails, you can't deduct the payment. If you deduct and the state audits and the sub didn't actually pay their GET, you're on the hook for the back-tax plus penalties.

What doesn't count

How to track it for the auditor

The state will ask you for sub records during any GET audit. What you need to keep, per sub, per project:

If you can produce this on demand for any payment, your deduction stands. If you can't, expect the deduction to be denied and a penalty assessed.

The Act 50 PTET wrinkle (post-2024)

Act 50 of the 2023 legislative session created a pass-through entity tax election that affects how S-corp and LLC contractors handle GET on a federal vs state level. The short version: electing PTET can offset some of your federal income tax liability, but it doesn't change your GET obligation. Don't confuse the two.

If you're operating as an S-corp or multi-member LLC and you haven't talked to a Hawaii CPA about PTET, you should. It's worth the appointment.

How BlueWave Projects handles this

We built the sub deduction directly into the BlueWave Projects invoice + sub tracking flow. When you log a sub payment, the system:

The GET deduction is computed automatically on every invoice. You see your post-deduction GET liability before you hit "send." It's the kind of thing that should have been baked into contractor software a decade ago — we built it because we needed it for our own jobs.

Want to try it? [Book a demo](/booking). Hawaii tax handling is wired in on every plan.

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