Hawaii Department of Taxation issued Tax Facts 98-1 updating its information on the general excise tax (GET) as it applies to medical and dental services. The publication provides answers to common questions in these industries.
GET is applied at the tax rate of 4% (plus the county surcharge if applicable) and is charged to providers based on gross income for business activities in Hawaii. GET is an expense that doctors and dentists incur by doing business in Hawaii, and they may charge patients GET as a way to recover their expense.
The maximum GET rate that a provider can visibly pass on to the consumer is 4.166% (4.712% if subject to the county surcharge). Rounding from 4.166% to 4.167% is prohibited. Only certain counties impose a surcharge at the rate of 0.5%. Those transactions in counties with a surcharge are subject to the state GET or use tax rate of 4% and 0.5% county surcharge (total rate of 4.5%). Insurance commissions for activities taxed as the 0.15% rate are not subject to the county surcharge. Activities such as wholesaling taxed at the 0.5% rate are not subject to the county surcharge.
If a patient’s insurance plan does not cover the payment of the GET and the plan does not limit the GET from being passed on to the insured, then the provider may visibly pass on GET to the patient. If a medical participating provider computes the GET on an amount greater than their gross income (greater than the insurance company’s eligible amount for charges of services), then only the amount of GET for eligible services payment is calculated and can be passed on to the insured for payment of GET. Dental participating provider insurance companies may use both the allowed amount and the approved amount in the calculation for the patient’s charge. Consumer protection laws prevent GET that is greater than what is charged from being passed on to consumers.
Whether GET is visibly passed on or not, the provider is subject to GET. A business is prohibited from claiming there is no tax charged if the business is subject to GET on the transaction.
Medicare, Medicaid and/or TRICARE payments to providers are also subject to GET.
Exemptions for GET exist for the sale of prosthetic devices and prescription drugs as well as vaccines. The sale must occur to an individual by a medical facility such as a hospital, infirmary, clinic, pharmacy, medical provider, dentist, or other licensed practitioner. To claim the exemption, the sale of the exempt items must be separately stated from any administrative and service fees or other charges. If the provider is claiming the GET exemption, then the provider cannot charge the customer GET.
Consumers should check with their insurance companies on the benefits their plan provides and whether GET is included as an eligible expense so they can verify they are properly being charged. Providers should ensure they are correctly charging GET based on considerations of payments of eligible insurance claims and based on the appropriate rates for their county as well as the use of the items (e.g., wholesale).
(Tax Facts 98-1, State of Hawaii, Department of Taxation, revised January 2023)