The Service and other activities B&O tax classification applies to the gross income derived from "veterinary services" as that term is defined in the "Definitions" chapter.
The Service and other activities B&O tax also applies to the gross income derived from grooming, boarding, training, artificial insemination, stud services, and other services provided to live animals.
The Retailing B&O tax classification applies to the gross income from the sale of drugs, medicines, other substances, or items of tangible personal property to consumers when the sale is not included in the veterinary services. The Retailing classification applies only when the veterinarian does not administer the drug, medicine, other substance, or item. In cases where the veterinarian only administers part of the drug, medicine, other substance, or item of tangible personal property to the animal, with further administration to be completed by the customer, the veterinarian must separately list the charge on the bill.
In short, the Retailing classification applies to income from all sales of animal care products to consumers that are not included in the definition of "veterinary services" discussed in the "Definitions" section.
Please note: When income is subject to Retailing B&O tax, the seller must collect retail sales tax from the customer, unless the sale is specifically exempt.
The Wholesaling classification of the B&O tax applies to the gross income from sales of tangible personal property to a purchaser who is not the consumer of the item and who intends to resell it. To document the sale-for-resale nature of the sale, the purchaser must provide the seller with a reseller permit.
See the "Dual Use Purchases" section of the "Payment of Sales/Use Tax/Deferred Sales Tax on Consumables" chapter for more information about resale certificates/reseller permits.
B&O tax exemptions and deductions
No deductions are allowed for costs of doing business. However, certain income may be deducted from gross income:
- Interstate and Foreign Sales: Income derived from veterinary services performed outside the state may be apportioned and deducted from gross income. Apportionment must be based on either separate accounting, (e.g., billable hours accumulated outside the state) or the cost of doing business method.
- Similarly, income derived from the sale of articles of tangible personal property, such as medicines and supplies that are shipped to customers outside the state are exempt from tax. Please note that items picked up in Washington by an out-of-state customer for use outside the state are fully subject to B&O tax.
- Casual Sales: Sales of tangible personal property by a business that does not generally sell such goods. These sales are generally related to a sale of capital assets.
- For example, a veterinarian may purchase new equipment and sell the existing equipment to another veterinarian. The sale of this equipment is a retail sale and subject to retail sales tax. However, the veterinarian may take a "casual sales" deduction equal to the amount of the sale under the Retailing B&O tax classification.
- Returns and Allowances: A veterinarian may take a B&O tax deduction for returned goods for which the buyer receives a full refund, including the proportional amount of sales tax. The refund sales tax should be separately stated on the refund invoice.
- Bad Debts: A deduction is allowed for returned checks and other income that has been reported on your tax return, but you are unable to collect from the customer.
City business and occupation tax and licenses
Approximately thirty-five cities impose a tax on general business activities. Although commonly referred to as a B&O tax, the Department of Revenue does not administer local B&O taxes. That tax administration is left to each city or town that imposes a B&O tax. Local B&O tax classifications may or may not mirror Washington State's B&O tax applications, exemptions, deductions, and measures of tax. Consequently, you should contact each city or town in which you conduct business regarding their specific taxes.
Approximately 160 Washington cities impose licensing requirements. For those cities imposing a tax on general business activities, the licensing requirements are in addition to the tax. Licensing fees vary from city to city. Fees may be based on a flat rate, number of employees, type of business, or square footage of office or building space.
The Business Licensing Service operates the Business Licensing Wizard, an online "licensing library," providing federal, state, county and city licensing contact information for proper licensing based on your business activity.