This is a challenging time for all small businesses in Hawaiʻi, and in some ways, especially for restaurants. Some of those issues go back to the time of the pandemic and the government response.
One Hawaiʻi restaurant is suing the state over a tax issue that they say is unfair. This comes as the industry faces many other challenges, including the impending state minimum wage increase from $14 to $16 at the beginning of 2026.
HPR sat down with Monica Toguchi Ryan, the third-generation owner of the longtime family restaurant Highway Inn, which has locations in Kakaʻako and Waipahu, plus a cafe at Bishop Museum.
BILL DORMAN, HPR: When did you first realize that you're going to be on the hook for the GET (general exercise tax)?
MONICA TOGUCHI RYAN, HIGHWAY INN: We received a Restaurant Revitalization Fund back in 2021, we were still in the height of the pandemic. Then we had the Lahaina fires happen in 2023, and then subsequent to that, we received a tax bill from the state Department of Taxation for about $40,000.
DORMAN: And that was something that you were not expecting, because there were no GET to go with the PPP (Paycheck Protection Program), with the EIDL (Economic Injury Disaster Loan) Program, and yet there was on this, that was a surprise.
TOGUCHI RYAN: Correct, back in 2020, the state Tax Department issued a TIR (tax information release), and in that — the state Tax Department has a very wide net in regards to general excise tax, I think many of us know that they can pretty much tax GET on pretty much any sale or income — and so they recognized that the pandemic was so severe, and so for all those people that received PPP, EIDL, PUA (Pandemic Unemployment Assistance), they clearly stated in this informational release that they would not have to pay general excise tax. The PPP was issued through banks, and so you would apply through your bank, and the banks would then issue, so there was, I would assume, some privilege in those relationships — if you had a good relationship with your bank, it had to be fair. But obviously, you knew people that could help assist you in that process and that application process. When it came to Restaurant Revitalization Funds, RRF, that was issued directly through the U.S. Small Business Administration. So from a data standpoint, maybe about 7% or 8% of restaurateurs across the country received PPP. Not everybody was affected the same way, and yet they received PPP. If you're a real estate company, for example, if you remember the bidding wars that happened through the pandemic.
DORMAN: But clearly, restaurants in a different situation and in a tougher spot, a lot of those minority-owned, a lot of those women-owned, so it's a different story.
TOGUCHI RYAN: So Congress then, subsequently, recognizing this disparity, had put aside $25 billion, $26 billion appropriated specifically for the restaurants. What they also recognized is that women, ethnic minorities, and veterans, also, or minority groups did not get federal pandemic monies. And so on top of the restaurants suffering or hospitality industry suffering, minority groups were also impacted greatly. And so what they allowed minority groups such as myself to do is they gave us some several days of a head start to apply for these funds. Now, in all these pandemic monies, the need was far, far greater than the amount of money that was available. So I'm sure, like within a day or so or two, this money was snatched up. So if you look at the data, the data does show that more minority groups were awarded under the RRF. And so what Congress had intended in terms of balancing the disparity of who received federal pandemic monies, they achieved that through the RRF, and that was really, quite frankly, a lifeline for so many restaurants. So what I find very difficult to digest is the fact that the industry that clearly suffered the most is now being required to pay general excise tax, while other industries that received PPP did not have to.
DORMAN: Now the (state) Legislature weighed in on this, among other committees, the Ways and Means Committee voted 13-0 to reverse this tax, basically on restaurant owners. What's your take on what happened to that?
TOGUCHI RYAN: That's a great question. And I think this is, the challenge is from a political standpoint, how things can be very challenging is that we went to the state Legislature in an attempt to — if the state Tax Department basically continued to pursue taxing restaurants, then we thought our state legislators would be able to support this bill, and they did, so it passed several committees. It passed unanimously in the (Senate) Ways and Means Committee, and then when it got to the (House) Finance Committee, the Finance chair, Kyle Yamashita, did not hear the bill. And for many people, including myself, who have provided testimony at the state Legislature many times, sometimes you just don't know how this works. And I was not aware that a chairperson of a committee could single-handedly kill a bill.
DORMAN: So the legislative route did not work, which took you to negotiations with the Department of Taxation. Now you're in this legal situation, so the case has been heard, and now you're going to be waiting to hear what they say on the case.
TOGUCHI RYAN: Correct. Yeah, so a lot of these things, whether it's unemployment or it's taxes, we have these state agencies where you can argue your case internally, administratively, and if you don't like the reply, you can go and appeal administratively. And once you exhaust that process, then you really have no choice after that to take — and it's pretty intimidating to take a state agency, right, the state Tax Department, and hold them basically accountable, but I believe that this action is highly unjust. I do believe that every state agency, when it comes to policymaking, it should not be arbitrary. It should be consistent, and definitely, it should not be discriminatory.
DORMAN: So if you could have the proverbial magic wand to make a policy change, to adjust something to make things better for small businesses in Hawaiʻi, what might that be?
TOGUCHI RYAN: Oh, gosh, that's such a complicated question. From a tax standpoint, for example, we pay one of the highest taxes in the country, on top of highest real estate, on top of highest goods. It is, from a policy standpoint and regulatory standpoint, we have a lot of regulations to comply with as well, and so we're constantly ranked as one of the worst places to do business in the country, on top of our energy prices, on top of our real estate prices, on top of our minimum wage. And, it's not that we are against minimum wage, but we have tried for several years to help our legislators understand the meaning of tip credit, because as a company, it's our back-of-house staff that really suffers — line cooks that have to learn their skill and trade for years. You could just hire somebody pretty quickly and teach them how to be a server, if they're articulate, but the wage disparity, because the minimum wage has gotten bigger, so people don't want to work in the back. They want to work in the front where they can make more money, and rightfully so.
DORMAN: Meanwhile, in terms of the folks in Hawaiʻi working minimum wage jobs.
TOGUCHI RYAN: It's so tough. I mean, it's a struggle to find housing. It's a struggle to find basic needs. Even your own income tax, for example, right, and our infrastructure, our roads, our airports, our public education, all these things require money, and we understand why we have taxes. I think, as a business owner, it's always been a struggle for me to understand where all this money goes. If we are one of the highest taxed populations out there, and we pay a lot of money — I'm not familiar with how our state spends its money.
DORMAN: Let me ask you this: anything that you see that's that's hopeful, what encourages you, what helps you get up in the morning?
TOGUCHI RYAN: It's the people. It's always going to be the people of Hawaiʻi. I think we have such a unique culture here. Obviously, Highway Inn has been doing Hawaiian food for almost 80 years. We definitely, going back to that question, see softening in Kakaʻako, where we rely more on tourism, and that's been quite affected. Waipahu has remained pretty stable. It's our local communities that really have supported us through the many years, and the reason why we're around for as long as we have been. But we have just this unique culture that relationships really do matter, and people do really care. I think, from a policy standpoint, from a tax standpoint, from a business regulatory standpoint, I definitely think we can do much, much better.
HPR checked with the state Department of Taxation, which sent a statement saying that “generally, income replacement payments are subject to general excise tax. However, due to the pandemic's economic impact at that time, the prior administration chose not to impose GET on payments received under PUA, forgiven PPP loans, or EIDL Grants.”
“The Restaurant Revitalization Fund, launched in May 2021, was not addressed in that or any subsequent guidance. Since no exemption was issued, the general rule applies—RRF funds are subject to GET.”
The case involving Highway Inn is now pending before the First Circuit Court.
Editor's note: Highway Inn has previously been an underwriter of Hawaiʻi Public Radio.
This story aired on The Conversation on Nov. 17, 2025. The Conversation airs weekdays at 11 a.m. Hannah Kaʻiulani Coburn adapted this interview for the web. Transcript text is lightly edited to improve clarity.
