What is business excise tax in Washington State?
In Washington State, the business excise tax refers primarily to the Business and Occupation (B&O) tax, a gross receipts tax levied on the gross income of businesses operating within the state. Unlike traditional corporate income taxes based on net profits, the B&O tax applies regardless of profitability.
Key Features of the Washington B&O Tax:
1. Tax on Gross Receipts
Washington does not impose a corporate or personal income tax. Instead, it taxes businesses based on gross revenue, with no deductions for costs of goods sold, operating expenses, or payroll.
2. Applicable to All Business Types
This applies to all businesses with income from Washington, which would include corporations, LLCs, partnerships and sole proprietorships. Businesses located out of state but with economic nexus in Washington might also be subject to the tax.
3. Tax Classifications and Rates
The B&O tax rate varies depending on the type of business activity. Common classifications include:
- Retailing: 0.471%
- Wholesaling and Manufacturing: 0.484%
- Service and Other Activities: 1.5% (as of 2025; subject to change)
4. Filing Requirements
Businesses must register with the Washington Department of Revenue and file excise tax returns monthly, quarterly, or annually, based on revenue volume.
5. Additional Excise Taxes
Some industries may also be subject to public utility taxes, use taxes, or sales tax collection requirements, depending on the nature of their operations.
Washington's B&O tax system requires careful planning, especially for businesses with narrow profit margins. At One IBC USA, we assist clients in understanding U.S. state tax regimes, optimizing entity structure, and ensuring full compliance with local obligations.
Contact us today to incorporate in Washington and implement a tax-efficient strategy tailored to your business model.
