Beginning with business activities occurring on or after Jan.1, 2020, a surcharge applies to the amount of tax payable under the Service and Other Activities B&O tax classification by businesses primarily engaged in one or more specified activities. The surcharge is in addition to the Service and Other Activities B&O tax rate of 1.5%, for an effective rate of 1.8%.
The specified activities fall generally into the following industry groups:
- Electric power
- Aerospace manufacturing
- Professional and commercial wholesalers
- Business-to-business electronic marketers
- Non-store retailers
- Information services
- Finance and Insurance
- Intangible assets
- Professional, scientific, and technical services
- Management of companies
- Healthcare (excluding hospitals)
- Business, Professional, Labor, Political, and Similar Organizations
The department has created an Excel workbook to help businesses determine if the surcharge applies to income subject to B&O tax under the Service and Other Activities classification. The workbook aggregates the 43 specified activities into the 13 industry groups shown above. Review the activities that fall into each of these 13 industry groups to determine if the surcharge applies to your business.
How do I report the surcharge?
You must report and pay the surcharge with your regular excise tax returns. Report the taxable amount from the Service and Other Activities classification on the Workforce Education (Surcharge on Service & Other Activities) line.
For example, if you have gross income of $43,000 for the month of October, all of which is subject to B&O tax under the Service and Other Activities classification, you will report $43,000 under the Service and Other Activities B&O tax classification (1.5%) and also $43,000 under the Workforce Education Surcharge (Service & Other Activities) (0.3%).
For persons subject to the surcharge that report under one or more B&O tax classifications, the surcharge applies only to taxable income subject to the Service and Other Activities classification.
For paper filers, we have added a new line to the return under the Service and Other Activities line.
Note for annual filers: The first return the surcharge is applied to is your Annual 2020 return, which is due by April 15, 2021.
Did you receive a warning in MyDOR?
A warning in MyDOR appears when both of the following apply:
- the description of your business activity provided on your business license application corresponds to at least one of the 43 specified activities
- you report under the Service and Other Activities B&O tax classification
What if I don’t believe the surcharge applies to me?
If you are not primarily engaged in one or more of the specified business activities and don’t believe the surcharge applies to you, leave the surcharge line blank.
You will need to maintain records to support your business activities in the event you are contacted by the Department.
What if I am not primarily engaged in the specified activities?
If you believe the description of your business activity is incorrect you may update a description of your business activity by submitting an Update Business Activity request in MyDOR.
You may also request a tax ruling from the department.
Primarily engaged means more than 50% of the cumulative gross amount reportable under any B&O tax classification during the current or immediately preceding calendar year was generated from engaging in one or more of the specified activities.
Gross amount reportable means the total value of products, gross proceeds of sales, and gross income of the business, reportable to the department before application of any tax deductions.