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Introduction of Business & Occupation Tax in Washington State

2026-01-15
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.

  1. 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.

  2. 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.

    Business Activity

    Rate

    Retailing

    0.00471

    Wholesaling

    0.00484

    Manufacturing

    0.00484

    Service & other activities

    0.015

    Service & other activities ($1 million or greater in prior year)

    0.0175




  3. 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)
    		 Has physical presence nexus in Washington.
    (2)
    		 Has more than $100,000 in combined gross receipts sourced or attributed to Washington.
    (3)
    		 Is organized or commercially domiciled in Washington.

    These thresholds will apply to all Washington income, including retailing, wholesaling, service, and other activities, and other apportionable activities.

  4. 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.

    Filing Frequency

    Due Date

    Monthly

    Due on 25th of each month

    Quarterly

    Due before the end of January, April, July, and December

    Annually

    Due on April 15th each year


  5. 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

Disclaimer

All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.

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