Washington Tax Incentives for Your Businesses

Business owners in Washington have access to dozens of state tax incentives, including tax credits, reduced Business and Occupation (B&O) tax, and tax exemptions. If you own a business in the Evergreen State, browse our list of business tax incentives below. 

Washington state tax incentives for businesses

Industry-specific tax credits

B&O Credit for Pre-Production Development Expenditures

This credit, open until July 1, 2040—is available to companies in the aerospace industry. That includes commercial airplane and component parts manufacturers and processors, companies involved in aerospace product development, certified FAR repair stations, and aerospace tooling manufacturers. 

Eligible aerospace companies can get a credit on their B&O taxes for conducting research, design, and engineering activities in Washington to develop an aerospace product. 

Learn more about the credit on Washington state’s Department of Revenue website. 

Need a refresher on the types—and amounts—of business taxes you pay in Washington? Our guide breaks it all down. 

B&O Credit for Property/Leasehold Taxes Paid on Aerospace Business Facilities

Aerospace manufacturing and product development companies in Washington are eligible for a credit on the property and leasehold taxes they paid on their business facilities. The qualifying activity for manufacturers and processors includes: 

• Property/leasehold taxes on new buildings, land, and the increased value of renovated buildings used in commercial airplane and component parts manufacturing, or in manufacturing tooling for planes
• Property taxes on equipment eligible for the machinery and equipment (M&E) exemption multiplied by a fraction for qualifying use

The qualifying activity for certified FAR repair stations and product development companies includes:

• Property/leasehold taxes on new buildings, land, and the increased value of renovated buildings used in aerospace product development or aerospace services
• Property taxes on qualifying computer equipment used in aerospace product development

Learn more about the credit here. 

Aluminum Smelter Tax Credits

Aluminum smelter companies that manufacture aluminum in Washington can get a B&O tax credit equal to the property tax they paid on their facilities. Aluminum smelters and processes can also qualify for a retail sales tax credit for the following: 

• Personal property used at their facility
• Tangible personal property incorporated in an aluminum smelter
• Labor and services at a smelter

B&O Tax/Public Utility Tax Credits for Electricity, Gas, and Natural Gas Sold to Aluminum  or Silicon Smelters 

Companies that sell electricity, gas, or natural gas to aluminum and silicon smelters in Washington can get a B&O tax credit. The credit is equal to the gross amount of sales to the aluminum or silicon smelter multiplied by the corresponding rate of Business & Occupation (B&O) Tax and/or Public Utility Tax (PUT). 

Production Incentive Program 

Washington Filmworks offers a Production Incentive Program to production companies that set their film, TV, and commercial projects in Washington state. 

Different projects have different minimum spending thresholds:

• Feature-length productions have to spend at least $500,000 to get 30% cash back
• Episodic productions have to spend at least $300,000 to get 35% cash back
• Commercial productions have to spend at least $150,000 and film in a rural county to get 40% cash back

Any projects that film in rural counties of Washington can get an additional 10% cash back on top of their base incentive. Apply for the program here. 

Employment tax credits

B&O Tax Credit for New Employment – International Services

Washington employers that create full-time positions in international services are eligible for a B&O tax credit. The credit is $3,000 per year per qualified job created. Businesses can take an additional $3,000 in credit a year for the following four years, as long as they retain the position. 

To qualify, businesses need to create full-time roles where the employees hired provide international services to people outside the United States. Those roles include but aren’t limited to the following specialties: 

• Computer and data processing
• Accounting and tax preparation
• Engineering
• Architecture
• Business consulting and management
• Public relations and advertising
• Surveying
• Geological consulting
• Real estate appraisal
• Financial services

To qualify, the new positions also have to be located in a Community Empowerment Zone (CEZ) or designated International Services District.

Related: Need to hire an international contractor? Here’s what you need to know about compensation, employee classification, and tax rules. 

Washington Customized Employment Training Program

The Washington Customized Employment Training Program is a B&O tax credit available to all Washington employers who offer customized employee training and make payments to the Employment Training Finance Account. 

The credit is equal to 50% of an employer’s payment to the Employment Training Finance Account. The program expires July 1, 2026. Learn more about the program here. 

B&O Tax Credit for New Employees in Manufacturing and Research and Development

This tax credit is available to Washington manufacturers, research and development facilities, and commercial testing facilities in rural counties or within a community empowerment zone. 

Eligible businesses that create new, full-time roles that increase employee headcount by 15% or more can qualify for credits ranging from $2,000 to $4,000. The $2,000 credit is available to businesses that create new positions with annual wages of $40,000 or less; businesses that create new roles with annual wages above $40,000 are eligible for the $4,000 credit. 

Learn more about the credit here. 

Related: Find out everything you need to know about hiring laws in Washington. 

General business tax credits

Employee Ownership B&O Credit

Washington state businesses that convert to an employee ownership structure can qualify for the Employee Ownership B&O Credit. Specifically, businesses have to either convert to a worker-owned cooperative or employee ownership trust or introduce an employee stock ownership plan. 

The credit amounts depend on which employee ownership structure a business chooses:

• For worker-owned cooperatives and employee ownership trusts, the credit is up to 50% (with a maximum of $25,000) of the costs of changing the business structure
• For employee stock ownership plans, the credit is up to 50% (with a maximum of $100,000) of the costs of incorporating the plan

Equitable Access to Credit Program

This tax credit is available to Washington businesses that contribute to the Equitable Access to Credit Program through the Department of Commerce. The Equitable Access to Credit Program helps lenders give businesses in historically underserved communities easier access to credit. 

Businesses can contribute up to $1 million a year to the program and take a dollar-for-dollar tax credit. Businesses can make contributions until June 29, 2027, and claim the credit until December 31, 2029. 

Main Street Tax Credit

The Main Street Tax Credit gives Washington businesses a credit for contributing to designated Main Street Organizations or the Main Street Trust Fund. The Main Street Program was designed to help revitalize Washington state’s downtown areas by giving funding to small businesses in need. 

Businesses that contribute to a Main Street Organization or the Main Street Trust Fund can get a credit equal to 75% of their contribution. The maximum amount of credits a business can take per year is $250,000. 

To use the credit, businesses need to have a B&O or public utility tax liability equal to or exceeding the amount of the credit. Find out how to apply here. 

Clean Alternative Fuel Commercial Vehicle and Vehicle Infrastructure B&O or PUT Tax Credit

This credit is designed for businesses that use commercial vehicles to transport commodities, merchandise, produce, refuse, freight, animals, or passengers. 

Businesses can get a B&O or PUT tax credit on purchases or leases of new clean alternative fuel commercial vehicles and vehicle component parts. Get all the details here. 

Washington state business tax exemptions

Washington has dozens of tax exemptions available to businesses that make specific purchases. Check out the exemptions below by industry: 

Air and aerospace

• Retail sales and use tax exemption in the construction of new facilities used for airplane repair and maintenance 
• Retail sales and use tax exemption in the construction of new facilities used for commercial airplane and component parts manufacturing
• Sales and use tax exemption on computer and software purchases for aerospace businesses

Aluminum smelting

• Use tax exemption on natural and manufactured gas by an aluminum smelter

Data centers

• Sales and use tax exemption for purchases of server equipment and power infrastructure at both rural and urban data centers

Farms, fisheries, and dairies

• Sales and use tax exemption for farmers and businesses establishing or operating anaerobic digesters
• Sales and use tax exemption on fuel purchases for farmers 
• Sales and use tax exemption on livestock nutrient management equipment and facilities for licensed dairies
• Sales and use tax exemption for replacement parts for farm machinery and equipment
• B&O tax exemption for seafood product manufacturers
• B&O tax exemption for manufacturers of fresh fruit and vegetables

Manufacturing 

• Sales and use tax exemption for manufacturers of manufacturing machinery and equipment 

Large-scale venues

• Leasehold excise tax exemption for arenas with a seating capacity of more than 4,000

Publishing 

• B&O tax exemption on gross income from businesses engaged in printing and publishing newspapers and digital content 

Electricity 

• Public utility tax exemption for light and power businesses that provide electricity to qualifying electrolytic processing businesses

Production 

• Sales and use tax exemption on production equipment rentals for motion picture and video production companies

Alternative energy

• Sales and use tax exemption on purchases of alternative fuel or plug-in vehicles
• Sales and use tax exemption on purchases of electric vehicle batteries or fuel cells, or fueling stations
• Sales and use tax exemption for purchases of qualifying batteries or shoreside infrastructure
• Sales and use tax exemption for purchases of qualifying new vessels or qualifying new marine propulsion systems
• Sales and use tax exemption on purchases of new or used electric vehicles powered by a hydrogen fuel cell
• Sales and use tax exemption on purchases of hog fuel
• Sales and use tax exemption for anaerobic digesters and equipment used to process biogas from landfills and anaerobic digesters
• Sales tax exemption for solar energy systems and installations
• Sales and use tax exemption for purchases of semiconductor gases and chemicals

Washington state city and county business tax credits

Many areas of Washington have their own local business tax advantages, most notably sales tax exemptions. Check out your city’s website to find out what your options are. 

Washington state business financing

Business financing gives you more flexibility, whether you need to weather a slow season or gather enough capital to say yes to a big opportunity. Fortunately, the Evergreen State has a ton of helpful business resources. For more information, check out Gusto’s guide to Washington grants and loans.