Business tax structure in Washington State

Washington State does not have a corporate or personal income tax. However, Washington businesses generally are subject to the following:

• Business and occupation (B&O) tax
• Retail sales/use tax
• Personal property tax

Business and Occupation tax - State

Virtually all businesses in Washington are subject to the state business and occupation (B&O) tax. This includes businesses formed as corporations, limited liability companies (LLCs), partnerships, and sole proprietors, whether nonprofit or for profit. The B&O tax is calculated on gross income from business activities. Mortgage brokers generally are taxable under the Service and Other Activities B&O tax classification. The rate is 1.5 percent of gross receipts.

Retail sales and use tax

Generally, all sales of tangible personal property to consumers are subject to retail sales tax. Retail sales tax is also due on certain services, such as charges by abstract, title insurance, escrow and credit bureau businesses, including tenant screening services.

Sellers must collect retail sales tax. However, if retail sales tax has not been collected, use tax is due from the in-state consumer. Examples of goods purchased on which use tax may be owed include:

• Computer equipment and fixtures purchased from an out-of-state vendor
• Tangible personal property acquired along with real property when an existing business is transferred
• Promotional items, such as hats, matches, calendars and other items given to customers or other individuals
• Magazine subscriptions
• Artwork

Use tax

• Is due when the goods are first used in Washington.
• Is calculated on the value of the goods and includes any amount paid for freight, delivery, or shipping charges paid to the seller.
• Rates are the same as the retail sales tax rates.
• Rates are calculated on where the buyer first uses the item in Washington (unlike retail sales tax where the rate is based on the location of the sale).

Personal property tax

Most people are aware that property tax applies to real property. Personal property that is used in a business is also subject to property tax. It includes equipment, furniture, and supplies. The tax rate for real and personal property is the same.

Every person who uses personal property in a business or has taxable personal property must complete a personal property tax listing form by April 30 each year. The assessor uses the form to value personal property for taxes due the following year.

County assessors and treasurers levy and collect the property tax. The county assessor mails personal property listing forms in January to persons who have previously listed personal property. If you do not receive a form or have questions about real or personal property taxes, contact your local county assessor’s office.

Local B&O tax

Many Washington cities impose a local B&O tax. This tax is separate from the state B&O tax. The Department of Revenue does not administer or collect local B&O taxes. For more information on local B&O tax and licensing, see License and tax information for cities and towns.