Introduction of Business & Occupation Tax in Washington State
The Business & Occupation (B&O) tax is a type of gross receipts tax imposed on businesses in the state of Washington. It is not an income tax but rather a tax on the business's gross income. The B&O tax applies to various business activities, and the rate varies depending on the classification of the business.
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What is the Business and Occupation Tax (B&O Tax)?
Washington's B&O tax on all corporations doing business in Washington is a gross receipts tax, measured based on the value of the product, gross receipts from sales, or gross receipts of the business. This means that no deductions can be made from the B&O tax for labor, materials, taxes, or other costs of doing business.
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What is the B&O Tax Rate?
The B&O tax rate varies by classification of business activity. The following are major business and corresponding tax rates.
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Business
Activity
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Rate
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Retailing
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0.00471
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Wholesaling
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0.00484
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Manufacturing
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0.00484
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Service & other activities
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0.015
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Service
& other activities ($1 million or greater in prior year)
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0.0175
|
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Out of State Business Reporting Thresholds and Nexus
Starting from January 1, 2020, a business must register to report B&O tax and collect/submit applicable sales tax, if the business meets any of the following thresholds in the current or prior year:
(1)
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Has physical presence nexus in Washington.
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(2)
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Has more than $100,000 in combined gross receipts sourced or attributed to Washington.
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(3)
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Is organized or commercially domiciled in Washington.
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These thresholds will apply to all Washington income, including retailing, wholesaling, service, and other activities, and other apportionable activities.
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How Do I Pay the B&O Tax?
B&O tax is reported and paid on the excise tax return or through electronic filing. If you are a new business, register for a business license with the Department of Revenue first. The following is the deadline for filing B&O tax returns.
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Filing Frequency
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Due Date
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Monthly
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Due on 25th of each month
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Quarterly
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Due
before the end of January, April, July, and December
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Annually
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Due on April 15th each year
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Business License
If your business is subject to B&O tax or sales tax, it usually means you need to apply for a business license. Once the business license application is approved, the business will be assigned a Uniform Business Identifier (UBI) and the Department of Revenue will send you information on handling sales tax and business and occupation tax. Business licenses are usually renewed once a year, with the renewal completed before the business license expiration date. Renewing after the business license expiration date will result in a late fee.
If you need to apply for or update a business license, please contact the professional consultants of Kaizen for further consultation.
Reference:
https://dor.wa.gov/taxes-rates/business-occupation-tax
https://dor.wa.gov/taxes-rates/business-occupation-tax/business-occupation-tax-classifications
https://dor.wa.gov/open-business/apply-business-license/plan-taxes/tax-classifications-common-business-activities
https://dor.wa.gov/open-business/apply-business-license
https://dor.wa.gov/education/industry-guides/out-state-businesses-reporting-thresholds-and-nexus
KNOWLEDGE
