Business and Occupation (B&O) Tax
The B&O tax is the tax applied to the gross amount received from conducting business. There are different reporting classifications for retail sales, wholesale sales, professional services, etc. Each classification has its own tax rate. Persons performing more than one activity may be subject to B&O tax under more than one reporting classification.
The B&O tax is a pyramiding tax. This means each business owes B&O tax on the gross income resulting from its activities. Unlike an income tax that applies to net income, there are no deductions for labor, materials, taxes, rent, or other costs of doing business.
Consumer
A consumer is any person who uses tangible personal property and receives services defined as retail sales. Such tangible personal property or services may be for personal use or for conducting business activities. If you're a seller, you need to know who is a consumer to know when to collect sales tax. If you're a buyer, you need to know when to pay sales tax and, if sales tax hasn't been paid, when to pay use tax or deferred sales tax.
Deferred Sales Tax
This tax applies under conditions where a person acquired goods without paying sales tax when sales tax was due. Generally, deferred sales tax applies when someone uses a resale certificate (through 12/31/09) or a reseller permit (effective 01/01/2010) to purchase goods that are used and not resold. This issue is discussed in greater detail in the "Dual Use Purchases" section of the "Payment of Sales/Use Tax/Deferred Sales Tax on Consumables" chapter. When reporting deferred sales tax, the taxable amount is reported on the use tax line of the excise tax return.
Gross Amount
The term "gross amount," which appears at the top of Column 1 on the excise tax return, is a "catch-all" term for whichever of the following terms is applicable to your business: "gross proceeds of sale," "gross income of the business," or "value of products." The gross amount includes all consideration received without deductions for the costs of doing business or other expenses.
Independent Contractor
An independent contractor is usually a person who engages in business activities other than as an employee. Determining whether a person is an independent contractor or an employee is important because independent contractors are subject to the B&O tax (and other business taxes) and employees are not. Various factors determine whether one is an employee or an independent contractor. Generally, independent contractors are entitled to the gross income of the business, are liable for business losses and expenses, file a statement of business income and expenses (Schedule C) for income tax purposes, may employ others, etc.
Master Business Application
This application is completed by persons that are required to register with one or more state agencies. Persons completing the application are assigned a Unified Business Identifier (UBI) Number. The business then receives a Master License to post at the business location.
Resale Certificate (valid through 12/31/09)
A completed resale certificate is given by a buyer to a seller to verify that the goods or retail services are being purchased for resale in the normal course of business without intervening use.
Reseller Permit (effective 01/01/2010)
Effective January 1, 2010, the resale certificate will be replaced with a reseller permit issued by the Department of Revenue. Reseller permits will be issed to businesses that make wholesale purchases. The Department will issue reseller permits based on specific criteria. In September 2009, businesses will be notified if they are getting a permit. Those receiving permits will get them in the mail in the fall. Businesses that don't automatically receive a reseller permit may apply directly to the Department. The applications will also be available on our web site.
Retail Sales Tax
A tax imposed on the buyer of goods and certain retail services. However, the seller is responsible for collecting the tax from the consumer and remitting the tax to the Department of Revenue. The sales tax is the combination of the state and local taxes.
RCW
Revised Code of Washington; state laws.
UBI/ Department of Revenue (DOR) Registration Number
Sometimes called a registration, tax, "C," or resale number, the Unified Business Identifier (UBI) number is a nine-digit number used to identify persons engaging in business activities. The number is assigned when a person completes a Master Application to register with or obtain a license from state agencies. The Departments of Revenue, Licensing, Employment Security, Labor and Industries, and the Corporations Division of the Secretary of State are among the state agencies participating in the UBI program. In most cases, your UBI number will also be your DOR registration number. Spouses who wish to file separately and business entities who have divisions that wish to file separately will be assigned separate DOR registration numbers as needed.
Use Tax
Use tax is imposed on the use of goods by consumers in this state when the state's retail sales tax has not been paid. With respect to the use of goods as a consumer, either sales tax or use tax applies but not both. In this manner, use tax serves to complement the sales tax. Like the sales tax, the use tax is a combination of state and local taxes. Use tax rates and sales tax rates are the same.
WAC
Washington Administrative Code; rules that carry the weight of law and explain how the laws are administered. |