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Q:  What are the major B&O tax classifications?

A: 
  • Manufacturing – This classification is used by firms that manufacture items in this state, regardless of where the product is sold. The Manufacturing B&O tax is based on the value of the products, which is generally determined by the selling price. If the producer sells and delivers the manufactured products within this state, the income is also reported under the Wholesaling and/or Retailing B&O tax classification. The Multiple Activities Tax Credit is available to offset the double tax payment when reporting under two or more B&O classifications.
  • Retailing – Sales of goods and certain services to consumers are retail sales. Businesses making retail sales are subject to the B&O tax under the Retailing classification, even when the sales are not subject to retail sales tax. For example, most prepackaged food products are exempt from retail sales tax, but the income from these sales is taxable under the Retailing B&O tax classification.

    Taxable retail services include:

      >Those generally performed on either real or personal property, including:
        Construction
Repair

 

      >Certain personal services, including:

 
 
        Auto detailing
        Day trips for sight seeing
        Dating and escort services
        Escrow services
        Insect spraying
Lawn mowing, tree and shrub pruning and trimming
Physical fitness services
Providing equipment with an operator
Tanning
Tattooing
 
     

  • Service and Other Activities – This classification is for businesses that provide personal and professional services. Any business activity that is not designated a particular rate by statute reports under this category.

    Business activities and services that would fall under this category include:

        Beauticians
        Consulting services
        Doctors
        Investment advising

    Lawyers

    Management services

    Tutors

 
  • Wholesaling – Wholesalers sell goods and certain services to persons who will resell them to others in the regular course of business. The B&O tax is calculated on the wholesale selling price. Retail sales tax is not collected on wholesale transactions.

    If you are a wholesaler, you must keep a resale certificate on file from each purchaser. The buyer gives the certificate to the seller to be retained in the seller's records. Keep completed resale certificates for 5 years for your records.

    There are two types of resale certificates.  The first is a single use resale certificate and must be given to the seller at the time of purchase.  It is good for that purchase only.  The second is a blanket resale certificate which may be given to a business which the buyer regularly purchases from.  This certificate is valid for as long as the buyer and seller have a recurring business relationship.  A "recurring business relationship" means at least on sale transaction in a continuous twelve month period.

    Note:  Effective January 1, 2010, the resale certificate will be replaced by a reseller permit issued by the Department of Revenue.  For more information, see our Reseller Permit page.
More information
Reseller permits
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