A new provision in HB2385 exempts certain construction work from Hawaii's general excise tax—but only if the project meets specific county-program criteria.
Most construction and trades owners in Hawaii don't realize that a new general excise tax exemption is coming their way—if their work qualifies. Buried in HB2385, Relating To Housing, is a provision that could meaningfully reduce tax liability for contractors, subcontractors, and small developers working on the right kind of housing project.
Here's what changed, and why it matters to your bottom line.
HB2385 adds a new category to Hawaii's general excise tax exemption statute. Specifically, Section 3 amends HRS §201H-36(a) and (b) to allow the Hawaii Housing Finance and Development Corporation (HHFDC) to certify GET exemptions for qualified persons and firms—including small contractors, developers, and subcontractors—who perform work on housing projects developed under a county assistance program.
In plain terms: if you're building or doing trades work on a housing project that a county has formally assisted or sponsored, you may be able to apply for an exemption from Hawaii's general excise tax on those services and materials. This is a new door that didn't exist before.
The exemption applies to contractors and subcontractors across all trades—electrical, plumbing, HVAC, framing, concrete, and others—as long as the housing project meets the county-program definition. Developers and small construction firms that take on these projects directly are also eligible to seek certification.
The key requirement: the housing project must be developed under a county assistance program. This means the county has formally supported or sponsored the project through a recognized program. Not every housing project qualifies—only those with county backing.
Once HHFDC certifies a project for the exemption, the compliance and regulatory-agreement term for new construction is set at 15 years. This is the window during which the exemption applies and during which the project must remain in compliance with program requirements. It's a meaningful runway, but it's not permanent.
Sections 2 and 3 of HB2385—the sections that establish this new exemption—take effect January 1, 2027. That gives you time to prepare, but the clock is ticking if you're planning to bid on county-assisted housing work.
One important caveat: the entire Act sunsets July 1, 2031. This exemption is not indefinite. If the legislature doesn't extend it, the benefit expires in mid-2031.
If you work in construction or trades in Hawaii, start tracking which housing projects in your area are county-assisted or county-sponsored. When January 2027 arrives, you'll want to understand whether a project qualifies and how to work with HHFDC on certification. Talk to your accountant about the implications for your business structure and tax planning.
The exemption is real, but it's not automatic. HHFDC has to certify it, and the project has to meet the criteria. Getting ahead of this now positions you to take advantage when the provision activates.
For a detailed, business-specific breakdown of HB2385 and how it affects your trades or construction firm, contact your local construction trade association or Hawaii Chamber of Commerce.