Whether you’re an established small business owner or an aspiring entrepreneur, you need to know which business taxes to expect and how they work. The state of Washington levies several different types of taxes, including the business and occupation (B&O) tax, retail sales tax, use tax, and public utility tax. The Department of Revenue, or DOR, collects and administers these taxes.
The B&O tax is a business privilege tax charged on all corporations, limited liability companies, partnerships, and sole proprietorships. This tax is imposed for the privilege of conducting business in the state of Washington and is based on the gross revenues generated by the business. The retail sales tax is a state-imposed excise tax that applies to the sale of tangible goods, including services such as repair, cleaning, altering, or installation activities. In addition, some service-based businesses may be required to pay the retail sales tax.
The state’s use tax applies to purchases that aren’t subject to sales tax. Generally, consumers pay the use tax when they buy items online or by subscription from out-of-state sellers that don’t collect sales tax. Additionally, use tax is owed when you buy personal property (such as furniture) in another state that doesn’t have sales tax or if you purchase an item in a city that has a higher sales tax rate than the state of Washington.
What are Washington Business Taxes?
Washington State imposes several types of taxes on businesses and transactions, including the Business and Occupation (B&O) Tax, Retail Sales Tax, Use Tax, and Public Utility Tax. Here’s a concise overview:
- Business and Occupation (B&O) Tax: This is a gross receipts tax, meaning it’s based on a business’s total revenues without deductions for expenses. It applies to various business activities and varies by the nature of the activity.
- Retail Sales Tax: This tax applies to the sale of tangible goods and some services. Due to the destination-based sales tax system, the rate is dependent on the delivery location of the goods or services.
- Use Tax: This complements the sales tax, applying to goods or services used in Washington where sales tax has yet to be paid, such as items bought from out-of-state vendors.
- Public Utility Tax: This tax is imposed on businesses providing public services like transportation, electricity, and gas. The type of service provided determines the rate.
These taxes form a significant part of Washington’s revenue, replacing the need for a state income tax. For more detailed information, visit the Washington Department of Revenue’s website.
