Washington Business & Occupation (B&O) Tax is a tax imposed by the state of Washington on the privilege of doing business within the state. It is a tax on gross receipts, regardless of profit, and is based on the type of business activity being conducted. The tax is imposed on companies operating a business in the state, including out-of-state businesses that have a presence in Washington. The revenue generated from the B&O tax helps fund various state programs and services.
Who is Responsible?
The responsibility for paying the Washington Business & Occupation (B&O) Tax falls on the business or individual conducting the business activity within the state of Washington. The business must register with the Washington Department of Revenue and file regular B&O tax returns to report their gross receipts and pay the tax owed. If a business fails to pay the B&O tax, it may be subject to penalties and interest.
Business & Occupational (B&O) Tax vs. Sales Tax
Washington Business & Occupation (B&O) Tax and sales tax are two different types of taxes imposed by the state of Washington. Sales Tax is a tax on the sale of goods and services, and it is calculated as a percentage of the sale price and is collected by the seller at the time of the sale. The revenue generated from sales tax is used to fund state and local government programs and services. In Washington, the state sales tax rate is 6.5%, with some cities and counties adding additional sales tax. The B&O tax rate varies based on the type of business activity being conducted. Washington B&O Tax and Sales Tax are reported on the same tax return, the Combined Excise Tax Return.
An area of confusion is whether a taxpayer should register and file Washington B&O tax if they are not collecting sales tax. Almost all businesses are subject to B&O tax since it’s a tax on gross income and not just taxable sales. Washington has different classifications for B&O business activities; the four main classifications are Retailing, Wholesaling, Manufacturing, and Services & Other Activities.
Source Advisors can assist taxpayers and business owners with their Washington B&O and Sales & Use Tax filing requirements. We can assist with registering your business and, if necessary, with ongoing filing needs. If you have any questions or want more information, please contact Source Advisors, and we can help you with your indirect tax compliance obligations.