Definitions for each B&O tax classification are listed below. Use these definitions to determine which classification(s) under which you need to report business income on the excise tax return. If you conduct multiple activities, you may need to report under several B&O tax classifications.
Take a look at our tax classifications for common business activities.
For assistance in determining the correct classification(s) for your business, or if you have received a return that does not have the classification(s) you need, contact us.
Aerospace Industry - Manufacturing of Commercial Airplanes, Components, or Aerospace Tooling/Wholesale of Commercial Airplanes, Components, or Aerospace Tooling/Retailing of Commercial Airplanes, Components, or Aerospace Tooling
Applies to manufacturers and processors for hire of commercial airplanes or component parts of commercial airplanes and manufacturers and processors for hire of tooling specifically designed for use in manufacturing commercial airplanes and component parts of commercial airplanes, and/or for manufacturers that sell such commercial airplanes, components, and tooling at retail or wholesale.
This rate expires on July 1, 2040. For more information, refer to the Aerospace Industry Manufacturer Tax Incentives special notices.
Cleanup of radioactive waste resulting from production of weapons or nuclear research and development when the work is done for the federal government. RCW 82.04.263
Removing natural resources from land or water. Examples include logging, mining, quarrying, and fishing operations. Persons selling resources extracted in Washington must also report under wholesaling and/or retailing. A Multiple Activities Tax Credit (MATC) (pdf) is available for persons extracting and selling natural resources in Washington. WAC 458-20-135
Note for Manufacturers and Extractors: All persons reporting manufacturing or extracting activities are to value their manufactured goods at the selling price (WAC 458-20-136). Therefore, manufactured items are not reported until sold. During the same reporting period, the items are to be reported under the wholesaling or retailing classification or both, depending on how the items are sold. To prevent double taxation, complete the Multiple Activities Tax Credit (MATC)form online.
Federal Aviation Administration (FAR) Repair Station
Applies to every person classified by the federal aviation administration as a federal aviation regulation (FAR) part 145 certificated repair station that is engaging within this state in the business of making sales at retail that are exempt from the tax imposed under chapter 82.08 RCW by reason of RCW 82.08.0261, 82.08.0262, or 82.08.0263. This rate expires July 1, 2040.
"Aluminum smelter" means the manufacturing facility of any direct service industrial customer that processes alumina into aluminum. Producing a new, different or useful substance or article of tangible personal property for sale or commercial or industrial use. Persons selling items must also report under wholesaling and/or retailing. A Multiple Activities Tax Credit is available for persons manufacturing goods and selling those same goods in Washington. (WAC 458-20-136)
For Profit Hospitals
The gross income derived from personal and professional services of hospitals, clinics, and similar heath care facilities (other than public or nonprofit hospitals and hospitals owned by the state). WAC 458-20-168
Research and development in the physical, engineering, and life sciences (such as agriculture, bacteriological, biotechnology, chemical, life sciences, and physical science research and development laboratories and services). RCW 82.04.29002
For contests of chance with a gross income of $50,000 or greater per year. RCW 82.04.285, Special Notice – Gambling Business and Occupation Tax (pdf).
Insurance agents, brokers, or solicitors
The amount of gross income is determined by the amount of gross commissions received, not by the gross premiums paid by the insured. “Gross income” includes gross receipts from commissions, fees, and other amounts which the agent, broker, or solicitor receives or becomes entitled to receive. It does not include amounts held in trust for the insurer or the client. No deduction is allowed for commissions, fees, or salaries paid to other agents, brokers, or solicitors, or for other expenses of doing business. Each person acting in the capacity of agent, broker, or solicitor is presumed to be engaging in business and subject to the B&O tax unless such person can demonstrate the he or she is a bona fide employee. WAC 458-20-164
Care of children age eight and above or enrolled in the first grade or above when provided in non-church facilities. Care provided to children under the age of eight or enrolled in kindergarten or below is deductible under the Other deduction. Care provided to children in church facilities is exempt. Child Care Tax Guide; WAC 458-20-167; RCW 82.04.2905
Effective December 1, 2006, the business and occupation (B&O) tax rate for persons engaged in manufacturing or processing for hire semiconductor materials is reduced to 0.275 percent.
The term "semiconductor materials" means silicon crystals, silicon ingots, raw polished semiconductor wafers, and compound semiconductor wafers.
In addition, the sale of gases and chemicals used by a manufacturer or processor for hire in the production of semiconductor materials are now exempt from retail sales tax and use tax. This exemption is limited to gases and chemicals used:
- in the production process to grow the product,
- to deposit or grow permanent or sacrificial layers on the product,
- to etch or remove material from the product,
- to anneal the product,
- to immerse the product,
- to clean the product,
- for other such uses whereby the gases and chemicals come into direct contact with the product during the production process, or
- to clean the chambers and other like equipment in which such processing takes place.
Persons making tax exempt purchases of gases and chemicals must provide the vendor with a properly completed Buyers’ Retail Sales Tax Exemption Certificate (pdf).
Producing a new, different or useful substance or article of tangible personal property for same or commercial or industrial use. Persons selling items must also report under wholesaling, and/or retailing. For products manufactured and sold in Washington, see the Multiple Activities Tax Credit (MATC) (pdf). WAC 458-20-136
Enter the dollar amount of manufactured products sold at wholesale/retail. This dollar amount should include only products you have manufactured and sold at wholesale/retail. Please do not include any products you may have sold at wholesale/retail but did not manufacture.
Note for Manufacturers and Extractors: All persons reporting manufacturing or extracting activities are to value their manufactured goods at the selling price (WAC 458-20-136). Therefore, manufactured items are not reported until sold. During the same reporting period, the items are to be reported under the wholesaling or retailing classification or both, depending on how the items are sold. To prevent double taxation, complete the Multiple Activities Tax Credit (MATC ) form online.
Income from manufacturing dairy products as defined in RCW 82.04.260(1)(c), such as milk, cheese, yogurt, ice cream, or whey from raw dairy materials, such as fluid or dehydrated milk or various milk products. Manufacturers may deduct this income when calculating their B&O tax and should claim a deduction for the full amount under “Exempt Manufactured Products.”
All wholesale sales should be reported under the Wholesaling B&O tax classification. A deduction may then be taken for the value of products manufactured and sold by the manufacturer at wholesale to a buyer who either:
- Transports the product outside the state in the normal course of business. This deduction is claimed under “Dairy, Fresh Fruit/Vegetable, and Seafood Mfd Products for Transport Out of State;” or
- Uses such dairy products as an ingredient or component in the manufacturing of another dairy product in Washington. This deduction is claimed under “Dairy product used in mfg of dairy products.”
Income from retail sales should be reported under the Retailing B&O tax and Retail Sales tax classifications. A deduction may then be taken under the B&O tax for the value of products manufactured and sold by the manufacturer at retail to a buyer that transports the product outside the state in the normal course of business. This deduction is claimed under “Dairy and Seafood Mfd Products for Transport Out of State.”
If you claim the deduction(s), you must electronically file an Annual Tax Performance Report by May 31 of the following year. See our Special Notice - Dairy product manufacturers’ B&O tax deductions extended – Update on tax reporting requirements. Exempt Food Sales. RCW 82.04.4268.
Income from manufacturing fresh fruits and vegetables by canning, preserving, freezing, processing, or dehydrating fresh fruits or vegetables. Manufacturers are exempt from B&O tax on this income and should claim a deduction for the full amount under “Exempt Manufactured Products.”
All wholesale sales should be reported under the Wholesaling B&O tax classification. A deduction may then be taken for the value of products manufactured and sold by the manufacturer at wholesale to a buyer that transports the product outside the state in the normal course of business. This deduction is claimed under “Dairy, Fresh Fruit/Vegetable, and Seafood Mfd Products for Transport Out of State.” Income from retail sales should be reported under the Retailing B&O tax and Retail Sales tax classifications.
If you claim the exemption, you must electronically file an Annual Tax Performance Report by May 31 of the following year. See our Special Notice - Fresh Fruit or Vegetable Manufacturers B&O Tax Exemptions Extended – Change in Filing Requirements. Exempt Food Sales. RCW 82.04.4266.
Income from manufacturing seafood products when the seafood products remain in a raw, raw frozen, or raw salted state at the end of the manufacturing by that person. Manufacturers are exempt from B&O tax on this income and should claim a deduction for the full amount under “Exempt Manufactured Products.”
All wholesale sales should be reported under the Wholesaling B&O tax classification. A deduction may then be taken for the value of products manufactured and sold by the manufacturer at wholesale to a buyer that transports the product outside the state in the normal course of business. This deduction is claimed under “Dairy, Fresh Fruit/Vegetable, and Seafood Mfd Products for Transport Out of State.”
All retail sales should be reported under the Retailing B&O tax classification. A deduction may then be taken for the value of products manufactured and sold by the manufacturer at retail to a buyer that transports the product outside the state in the normal course of business. This deduction is claimed under “Dairy and Seafood Mfd Products for Transport Out of State.”
If you claim the exemption(s), you must electronically file an Annual Tax Performance Report by May 31 of the following year. See our Special Notice - Seafood product manufacturers B&O tax exemptions extended – Change in filing requirements. Exempt Food Sales. RCW 82.04.4269.
Manufacturing in this state solar energy systems using photovoltaic modules or stirling converters. Also manufacturing in this state solar grade silicon, silicon solar wafers, silicon solar cells, thin film solar devices, or compound semiconductor solar wafers to be used exclusively in components of such systems. The B&O tax rate is 0.275 percent. Requires the business to file an Annual Tax Performance Report. See also Wholesaling of Solar Energy on this page. RCW 82.04.294.
If you manufacture wood biomass fuel, report the income under Manufacturing of Wood Biomass Fuel B&O tax classification. The tax rate is 0.138 percent. Wood biomass fuel means a liquid or gaseous fuel produced from lignocellulosic feedstocks, including wood, forest, field residue, and dedicated energy crops. The term does not include wood treated with chemical preservatives.
You should report all wholesale sales under the Wholesaling B&O tax classification. Then, you can take an Interstate and Foreign Sales deduction for the value of products you manufactured, sold at wholesale, and delivered to buyers outside the state. You should report income from retail sales under the Retailing B&O tax and Retail Sales tax classifications.
Applies to aerospace non-manufacturers engaged in this state in the business of aerospace product development for others. “Aerospace product development” means research, design, and engineering activities performed in relation to the development of an aerospace product, including prototype development, testing and certification. The term includes the discovery of technological information, the translating of technological information into new or improved products, processes, techniques, formulas, or inventions and the adaption of existing products or new models or derivatives of products or models. “Aerospace Products” are commercial airplanes and their components, machinery and equipment designed primarily for the maintenance, repair, overhaul, or refurbishing of commercial airplanes or their components by federal aviation regulation part 145 certificated repair stations, tooling specifically designed for use in manufacturing commercial airplanes or their components.
An Annual Tax Performance Report must be filed with the Department detailing employment, wages, and employer provided health and retirement benefits for employment positions in Washington by May 31 of each year. Special Notice – Non-manufacturer Aerospace Tax Incentives.
Effective July 1, 2005, a new B&O tax is imposed on persons engaging within this state in the business of conducting race meets for which a license must be obtained from the Washington Horse Racing Commission. The amount of tax is equal to the gross income of the business from parimutuel wagering multiplied by the rate of 0.1 percent through June 30, 2006, and 0.13 percent thereafter. “Gross income of business” received from parimutuel wagering does not include amounts paid to players for winning wagers, or taxes imposed or other distributions required under Chapter 67.16 RCW.
The B&O tax imposed on person conducting race meets is in addition to any other tax imposed on such activities and will be deposited in the problem gambling account. For more information, see our Special Notice – Gambling Business and Occupation Tax.
Prescription Drug Warehousing
Operating a warehouse and reselling prescription drugs for human use to persons selling at retail or to hospitals, clinics, health care providers, or other providers of health care services. Must be registered with the Federal Drug Enforcement Administration and the State Board of Pharmacy. RCW 82.04.272
Splitting/Processing of Dried Peas
Splitting or processing dried peas in Washington. Persons selling these products in Washington must also report under wholesaling and/or retailing, retail sales tax, and litter tax. This reporting classification may be eligible for the Multiple Activities Tax Credit (pdf). WAC 458-20-136.
Printing and Publishing
Persons printing and/or publishing newspapers, magazines, and periodicals must report income, including advertising income, under this classification. Persons who both print and publish books, music, circulars, etc., report gross income, including advertising income, under printing and publishing. Persons who only publish books, music, circulars, etc., report advertising income under Service and Other Activities. Persons selling printed and/or published materials to consumers must also collect retail sales tax. Persons reporting under printing and publishing are not subject to the retailing or wholesaling B&O tax with respect to these sales. The retailing B&O tax gross and retailing sales gross will not be the same. Litter tax may also be due. WAC 458-20-143; WAC 458-20-144.
Processing for Hire
Performing labor and mechanical services upon materials belonging to others resulting in a new, different or useful article of tangible personal property produced for sale or commercial or industrial use. If a person provides 20 percent or more of the value of materials, the income should be reported under the manufacturing classification. Persons who are processing for hire tangible personal property for consumers must also collect and report retail sales tax. Persons reporting under processing for hire are not subject to the retailing or wholesaling B&O tax with respect to these sales. Retailing and Retail Sales lines will not be the same. WAC 458-20-136
Public or Nonprofit Hospitals
Applies to gross income derived from personal and professional services to patients by hospitals operated as nonprofit corporations, operated by political subdivisions of the state, or operated but not owned by the state. WAC 458-20-168; RCW 82.04.260
Persons engaged in the business of buying and selling fruit or produce, as agents of others. Tax is due on the business activities of such persons, irrespective of whether the business is conducted as a cooperative marketing association or as an independent product agent. WAC 458-20-214
Grocery distribution cooperative" means an entity that sells groceries and related items to customer-owners of the grocery distribution cooperative and has customer-owners, in the aggregate, who own a majority of the outstanding ownership interests of the grocery distribution cooperative or of the entity controlling the grocery distribution cooperative. "Grocery distribution cooperative" includes an entity that controls a grocery distribution cooperative.
Businesses that print newspapers, publish newspapers, or both. The definition of "newspaper" includes electronic (online) versions of newspapers. Note: The electronic version of the printed newspaper must share content with the printed newspaper and be prominently identified by the same name as the printed newspaper or otherwise conspicuously indicate that it is a complement to the printed newspaper.
Any business claiming the preferential tax rate must file electronically an Annual Tax Performance Report with the Department of Revenue on or before May 31 of the year following the year in which a person becomes eligible to claim the reduced B&O tax rate. This tax preference is subject to public disclosure 24 months after it was claimed. Click here for more information on this public disclosure. See Special Notice – B&O Tax Rate Lowered for Printing and/or Publishing of Newspapers.
Disposing of low-level waste as defined by RCW 43.145.010 which states: Low level waste means waste material which contains radioactive nuclides emitting primarily beta or gamma radiation, or both, in concentrations or quantities which exceed applicable federal or state standards for unrestricted release. Low level waste does not include waste containing more than ten nanocuries of transuranic contaminants per gram of material, not spent reactor fuel, nor material classified as either high-level waste or waste which is unsuited for disposal by near-surface burial under any applicable federal regulations. RCW 82.04.260, RCW 43.145.010 Note: This tax classification is used by only a few select taxpayers.
Applies to all transactions subject to retail sales tax. Sale, rental, repair, or installation (including labor) of tangible personal property and digital products purchased by consumers for their own use (not for direct resale or as an ingredient used to produce or process an article for resale). Includes transient lodging and some amusement, personal services, and recreation activities. Construction (material and labor) performed for a consumer is a retail activity. RCW 82.04.050
This classification, with respect to sales to motor carriers, applies to retail sales that are exempt from retail sales taxes because of other statutory provisions. When the retail sales tax exemption requirements for other classification are met, this classification applies to sales and service of motor vehicles, trailers, and component parts, the lease of motor vehicles and trailers without an operator, and charges for labor and services rendered in respect to constructing, cleaning, repairing, altering or improving vehicles and trailers or their component parts. The seller must obtain a Buyers' Retail Sales Tax Exemption Certificate (pdf) from the buyer. WAC 458-20-174; 458-20-175; 458-20-176
Income from royalties or charges in the nature of royalties for the granting of intangible rights. The term royalties means compensation for the use of intangible property such as copyrights, patents, licenses, franchises, trademarks, trade names, and similar items. It does not include licenses for canned software or compensation related to natural resources, such as mining or drilling rights. RCW 82.04.2907, Special Notice - Royalties B&O Tax Rate Increase
Service and Other Activities
In general, includes persons rendering professional or personal services to others (as distinguished from services rendered to personal property, or the leasing or renting of tangible personal property), including:
- Accountants, architects, attorneys, bookkeepers, chiropractors, dentists, janitors, landscape architects, lawyers, physicians, and real estate agents
- Consulting services
- Janitorial services, including house cleaning (but not including construction cleanup services)
- Beauticians and massage therapists
It does not include persons engaged in the business of repairing, improving, etc., the personal property of others, such as automobile, house, jewelry, radio, refrigerator and machinery repairmen, laundry or dry cleaners. Also, it does not include certain personal and professional services specifically included within the definition of a "sale at retail," such amusement and recreation businesses of a participatory nature, abstract, title insurance and escrow businesses. WAC 458-20-224
Gambling Contests of Chance (less than $50,000 per year)
Persons whose gross income from contests of chance is less than fifty thousand dollars in a calendar year. Contests of chance include social card games, bingo, raffles, punchboard games, and pull-tabs. RCW 82.04.285, Special Notice – Gambling Business and Occupation Tax (pdf).
Slaughtering, Breaking and Processing Perishable Meat; Manufacturing Wheat into Flour, Soybean & Canola Processing
Slaughtering, Breaking and Processing Perishable Meat
Slaughtering, breaking, and/or processing perishable meat products and/or selling the same at wholesale. If perishable meat products are manufactured and sold at retail in Washington, report those amounts under manufacturing and retailing, retail sales tax, and litter tax. WAC 458-20-136
Manufacturing Wheat into Flour, Soybean & Canola Processing
Manufacturing wheat into flour, soybeans into soybean oil, sunflower seeds into sunflower oil, and canola into canola oil, meal, or canola byproducts. Persons selling these products in Washington must also report under wholesaling and/or retailing, retail sales tax, and litter tax. Multiple Activities Tax Credit (pdf), Exempt Food Sales deduction , WAC 458-20-136
Timber or Wood Products: Manufacturing of Timber or Wood Products/Wholesaling of Timber or Wood Products/Processing for Hire Timber Products/Sale of Standing Timber/Extracting Timber/Extracting for Hire Timber
Applies to timber harvesting and certain manufacturing/processing activities to include certain sales of standing timber and certain definitions for this program. The tax applies to:
- Extracting or extracting for hire timber
- Manufacturing or processing for hire timber into timber products or wood products
- Manufacturing or processing for hire timber products into other timber products or wood products
- Sales of standing timber (that must be severed within 30 months)
Selling at wholesale:
- Timber extracted by the seller;
- Timber products manufactured by the seller from timber of other timber products; and
- Wood products manufactured by the seller from timber or timber products.
Taxpayers reporting under the reduced B&O tax rate must file all required tax returns and the Annual Tax Performance Reports using our e-file system. The Annual Tax Performance Report must be filed by May 31 of the year following the year in which the reduced rate is taken. Small Harvesters are not required to file the Annual Tax Performance Report or file electronically. RCW 82.04.260; WAC 458-20-13501
Travel Agent Commissions/International Charters Freight Brokers/Stevedoring/Tour Operators/Assisted Living Facilities/International Investment Management Services
Travel Agent Commissions
Arranging transportation, lodging, meals, or other similar services that are purchased by the customer and where the travel agent or agency merely receives a commission for arranging the service. WAC 458-20-258
International Charter, Freight Brokers, and Stevedoring
International trade, brokering or cargo business, stevedoring, and associated activities of moving goods and commodities in waterborne foreign commerce. WAC 458-20-193D
Providing directly or through third party providers, transportation, lodging meals, and other associated services where the tour operator purchases or itself provides some or all of the services offered, and is itself liable for the services purchased. WAC 458-20-258
Assisted Living Facilities
Providing room and domiciliary care to residents of boarding homes licensed under chapter 18.20 RCW. A deduction is allowed for amounts received for providing adult residential care, enhanced adult residential care, or assisted living services under contract with the Department of Social and Health Services to residents who are Medicaid recipients. WAC 458-20-168
International Investment Management Services
Providing investment management services and at least ten percent of the gross income of such persons is derived from providing investment management services to persons or collective investment funds residing outside of the United States. RCW 82.04.293; RCW 82.04.290.
Sales of tangible personal property and/or labor performed for persons who resell the same in the normal course of business. Wholesalers must obtain a Reseller Permit from their customer. Merely obtaining a UBI/account ID from the customer is not sufficient for this requirement. WAC 458-20-102
Making wholesale sales of solar energy systems using photovoltaic modules or stirling converters manufactured by the seller. Also making wholesale sales of solar grade silicon, silicon solar wafers, silicon solar cells, thin film solar devices, or compound semiconductor solar wafers manufactured by the seller to be used exclusively in components of such solar energy systems. The B&O tax rate is 0.275 percent. Requires the business to file an Annual Tax Performance Report. See also Manufacturing of Solar Energy on this page. RCW 82.04.294.
Warehouse/Radio and TV Broadcasting/Public Road Construction/Government Contractors/Chemical Dependency Center/Canned Salmon Labelers
The gross income of the business of operating a warehouse includes income from storing, handling, sorting, weighing, measuring, and loading or unloading for storage of tangible personal property. WAC 458-20-182
Radio and TV Broadcasting
Applies to gross income from the sale of radio or television advertising, and any other gross income from broadcasting, excluding sales to other broadcasters of the right to broadcast material on processed film, sound recorded magnetic tape, or other transcriptions. WAC 458-20-241
Public Road Construction
Building, repairing, or improving roads, transportation facilities, bridges, or like facilities owned by municipal corporations, political subdivisions of the state, or the federal government which are used primarily for foot or vehicular traffic. Persons reporting public road construction activities owe sales and/or use tax on all materials installed or used. Person building, repairing, or improving roads for the state of Washington reporting on retailing and retail sales tax. Construction Tax Guide; WAC 458-20-171
Building, repairing or improving real property owned by the United States, its departments, institutions and instrumentalities, and city, county and Indian housing authorities. This classification applies only to construction contracts. Persons performing government contracting activities owe sales and/or use tax on all materials installed or used, regardless or supplier. Persons performing construction activities for state and local government report on retailing and retail sales tax. Construction Tax Guide, WAC 458-20-17001
Chemical Dependency Centers
Applies to providers of intensive inpatient or recovery house residential treatment services for chemical dependency who have been certified as such by Department of Social and Health Services, Division of Alcohol and Substance Abuse on income received from the federal government, the state of Washington, or any municipal corporation or political subdivision of the state for providing such qualifying services. See our Special Notice - Chemical Dependency Service Providers.
Canned Salmon Labelers
Persons inspecting, testing, labeling, or storing canned salmon owned by another person. ETA 3105.2009 (pdf).