Washington Small Business Taxes: The Employer’s 2024 Guide

Washington offers a vibrant environment for business, with about 645,000 small businesses employing 49% of the state’s workforce. Whether you’re an established business owner or planning to start a new venture, understanding the tax landscape in Washington is crucial. This guide provides a comprehensive overview of the various taxes small businesses in Washington must navigate, including tax rates, filing requirements, and deadlines.

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Types of Business Taxes in Washington

Business owners in Washington may be subject to various taxes depending on their business structure, activities, and revenue. Here’s a breakdown of the main types of taxes:

Business and Occupation (B&O) Tax
- Applicable Entities: Corporations, LLCs, partnerships, sole proprietorships
- Tax Rate: Generally 1.5% of gross income, but it varies by classification; local taxes also may apply, separate from the state B&O tax
- Filing Requirements: Monthly by the 25th day of the following month, quarterly by the end of the month following the quarter, or annually by April 15, based on estimated annual business income
Retail Sales and Use Tax
- Applicable Activities: Retail sales, certain services
- Tax Rate: 6.5% (local rates may apply)
- Filing Requirements: Monthly by the 25th day of the following month, quarterly by the end of the month following the quarter, or annually by April 15, based on estimated annual business income
Unemployment Tax
- Applicable Entities: Employers with employees
- Tax Rate: Varies based on business’s experience rating
- Filing Requirements: File quarterly reports by April 30, July 31, October 31, and January 31
Personal Property Tax
- Applicable Entities: Businesses using personal property
- Tax Rate: Based on property type and value
- Filing Requirements: Report annually to the county assessor by April 30

How to File and Pay Washington Business Taxes

Business taxes in Washington can be filed and paid through various methods:

Online Filing and Payment: Use My DOR for electronic submissions and payments.
Mail: Send forms and payments to the address on the form (where allowed).

Important Deadlines

Keep track of these key dates to avoid penalties:

Excise Tax Returns (for B&O, sales, and use taxes): Due monthly by the 25th day of the following month, quarterly by the end of the month following the quarter, or annually by April 15
Unemployment Tax and Wage Reports: Due quarterly by April 30, July 31, October 31, and January 31

Tax Credits and Incentives

Washington offers several tax credits and incentives for small businesses, including:

Small Business B&O Tax Credit: This is available to businesses with B&O tax liability below a certain threshold. It varies depending on the total amount of B&O tax due for all classifications after the business takes other available tax credits.
Multiple Activities Tax Credit: This is for businesses that perform more than one taxable activity for the same product (for example, manufacturing and selling), so they don’t pay B&O tax twice on the same amount. It is also available for businesses that pay a gross receipt tax to another state.
New Employees in Manufacturing and Research & Development in Rural Counties B&O Tax Credit: This is available to businesses with a manufacturing or research and development project located in either a rural county or a Community Empowerment Zone. The project must result in a 15% hiring increase in total employees at that facility from the previous four quarters and maintain the new positions for one year.

Washington’s business tax breakdown by business type

Business taxes can get complicated, so below, we’ve included a chart that breaks down which taxes different business structures usually pay.

Keep in mind that pass-through entities don’t pay federal income taxes themselves—the obligation is passed on to their business owners or shareholders, who pay them through their personal income tax returns.

Business type	Business and occupation tax	Sales and use tax	Unemployment tax	Federal income taxes
C corporation	Yes	Yes, if applicable	Yes, if you hire employees	Yes
S corporation	Yes	Yes, if applicable	Yes, if you hire employees	Yes (pass-through)
LLC	Yes	Yes, if applicable	Yes, if you hire employees	Yes (pass-through)
Partnership	Yes	Yes, if applicable	Yes, if you hire employees	Yes (pass-through)
Sole proprietorship	Yes	Yes, if applicable	Yes, if you hire employees	Yes, by way of individual income tax

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Small Business Taxes in Washington State: The Employer’s Complete 2023 Guide

Washington state is home to over 650,000 small businesses, according to 2022 data from the Small Business Administration’s Office of Advocacy. Small businesses make up 99.5% of all Washington businesses and employ 1.4 million people across the state.

Whether you’re an established business owner or an aspiring entrepreneur living in Washington, it’s important to understand how small business taxes in Washington state work. Keep reading for more information on which business taxes to expect, which business entities have to pay them, and when.

What kind of business taxes do you have to pay in Washington?

Washington doesn’t impose corporate or personal income taxes. However, as a business owner in Washington State, you may have to pay a business and occupation (B&O) tax, a retail sales tax, a personal property tax, or a public utility tax.

Need to know your federal tax bracket? Check out our tax bracket guide here.

Washington business and occupation (B&O) tax

Washington imposes the B&O tax on almost all small businesses for the privilege of doing business within the state. This applies to corporations, Limited Liability Companies (LLCs), partnerships, and sole proprietorships.

Washington calculates B&O tax based on your gross income from business activities in the state. The tax rate varies by business classification. However, the majority of small businesses fall into the “service and other activities” category, which has a tax rate of 1.5% of gross receipts.

You can’t take deductions from the B&O tax for labor, materials, taxes, or other costs of doing business. However, you can take certain B&O tax credits, including the following:

Washington retail sales tax

Washington imposes retail sales tax on any businesses that sell products (including digital products) within the state. Businesses making retail sales collect sales tax from their customers, then pay taxes periodically to the state. There are certain exceptions to retail sales tax, including food and prescription drugs.

Some service-based businesses are also subject to the retail sales tax. This includes businesses with installation, repair, cleaning, altering, improving, construction, and decorating services, as well as retail recreational services and lawn maintenance.

The current sales tax rate in Washington state is 6.5%. However, you also must add local sales tax rates on top of that; those vary by location.

Washington use tax

Washington imposes a use tax on items that aren’t subject to sales tax. Generally, consumers end up paying use tax. Let’s say, for example, that you purchase a printer at a garage sale where no sales tax is charged or collected. In that case, you’d have to pay use tax on the printer.

Here are some other instances where use tax applies:

You’re a Washington resident and you purchase goods in another state that doesn’t have a sales tax or in a state with a lower sales tax than Washington’s.
You purchase goods from someone who’s not authorized to collect sales tax.
You purchase goods out of state online, by subscription, or through a mail-order company—and the company doesn’t collect sales tax.
You acquire personal property (like furniture) when you purchase real property (like an office building).

The use tax rate is the same as your local sales tax rate. You can consult this resource for a list of local Washington sales and use tax rates by county.

Washington personal property taxes

Washington also levies a tax for any personal property you use for business purposes. That includes machinery, equipment, furniture, and supplies. For example, let’s say you buy a sleek sofa for your home; after a year, you decide to move the sofa to the lobby of your office space. In that case, you’d have to pay a tax on the sofa for the privilege of using it for your business.

Your local county assessor values the property at 100% of its current market value, which is the amount that a buyer would pay a seller. If you use personal property for your business, you have to fill out a personal property tax listing form and file it with your county assessor’s office by April 30 of each year. The assessor will then use the listing to value your personal property for taxes due the next year.

You pay your personal property taxes to the county treasurer’s office where your property is located. To find out your tax rate and download a personal property tax listing form, contact your local county assessor or treasurer.

Washington state public utility tax

The public utility tax is a tax on certain public service businesses in Washington. The public utility tax replaces the B&O tax for businesses in transportation, communications, and the supply of energy, natural gas, and water. The public utility tax rates range from 0.6% to over 5%, depending on the business activity.

How to pay business taxes in Washington state

You report and pay B&O tax, retail sales tax, use tax, and any applicable public utility tax when you file your Washington state excise tax return. New businesses need to register with the Washington State Department of Revenue to receive information about how and when to file their taxes.

The Department of Revenue assigns every business a filing frequency—monthly, quarterly, or annually—based on what the estimated annual business income.

Monthly returns are due on the 25th day of the following month. For example, a July tax return is due by August 25.
Quarterly returns are due by the end of the month following the close of a quarter. For example, Q1 returns are due April 30.
Annual returns are due by April 15.

Check here to see the filing due dates for each year. As of 2020, you can’t pay your taxes by mail. You have to file your returns and pay online by signing up for or logging into Washington State’s tax filing and payment system, My DOR.

Need more tax guidance? Here’s a tax guide for small business owners.

File your Washington State business taxes with Gusto

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