A Complete Small Business Tax Guide: Washington State (2024)

Washington, the Evergreen State, with its world-class cities of Seattle, Vancouver, and Spokane, is a popular place to establish a business. While there is no personal or corporate income tax, you would be responsible for paying other taxes, contributing to Washington's high overall tax burden.  

Thriving in such a unique environment takes effort and planning, including a strategic approach to business tax liability. Use this blog as your complete guide to small business taxes in Washington state in 2024. 

Washington State Small Business Taxes

Washington is not considered a tax-friendly state, which may be surprising considering there's no corporate or income tax. Instead, Washington collects other taxes, including property and sales tax.

What you'll pay in property taxes will vary by region, but the average across the state is usually 1% of the real estate's market value. State sales tax is 6.5%, which can inflate to nearly 10% when local sales tax is factored in. 

Small Business License in Washington State

You should register your business with Washington's Department of Revenue (DOR) if it meets any of the following requirements: 

• Your business will require endorsements from the city, county, or state.
• Your business must pay taxes or fees to the DOR.
• Your business meets the threshold for Nexus reporting requirements.
• Your business is a buyer or processor of specialty wood products.
• You are doing business using a name other than your full legal business name.
• You're planning to hire employees within 90 days.
• You sell products or services that require the collection of sales tax.
• Your business's gross income is $12,000 per year or more.

Business and Occupation Tax in Washington State

Washington's Business and Occupation (B&O) tax is a gross receipts tax that measures the value of products, gross proceeds of sale, or gross income of your business.

This tax does not allow deductions for labor, materials, and other operating costs because it is calculated based on gross income. However, there are credits and exemptions available for the B&O tax. 

Small Business Tax Credits

You are entitled to a credit if your business is under a B&O tax liability threshold. The credit your business receives will depend on the total amount of B&O tax due for all classifications after you've taken any other B&O tax credits.

B&O Surcharge Exemptions In Washington State

Activities that can help your business qualify for B&O tax exemptions and deductions include:

• Caring for children under eight years old and below the first grade.
• Care by a church exempt from property taxes for periods of less than 24 hours.
• Health or social welfare services funds received.

Local Business And Occupation Taxes

Like the Washington state sales tax, many localities charge a B&O tax specific to their region. This local B&O tax is in addition to the tax charged by the state of Washington. 

Retail Sales and Use Tax in Washington State

The retail sales tax combines Washington's 6.5% tax rate with the local sales tax, which will vary depending on the location. 

Sales Tax Exemption Programs

Most sales of tangible personal property to consumers are subject to sales tax. These include: 

• Greeting cards and postcards
• Stationery supplies 
• Office supplies 
• Packing supplies

Certain items, such as postage stamps, are exempt. 

Local Sales and Use Taxes

To determine the local sale and use tax rate, the DOR offers this tax rate lookup tool. 

Personal Property Tax in Washington State

Most of the property you use while conducting business is subject to the personal property tax, including all your assets and supplies. Your inventory held for sale is exempt. Items that qualify for the personal property tax include: 

• Chairs
• Mirrors
• Washing sinks
• Hair dryers
• Styling tools

Payroll Taxes in Washington State

Running payroll for Washington-based businesses differs from other states because there is no state or local income tax. However, other withholdings should be made, including unemployment insurance contributions and workers' compensation.  

Business Entity and Small Business Taxes in Washington State

Regardless of how your business is formed, it will almost certainly be subject to the B&O tax. Entities subject to this tax include: 

• C corporations
• S corporations
• Limited Liability Companies
• Partnerships
• Sole Proprietorships

Depending on the nature of your business, you may also be subject to personal property and sales and use taxes in the state. 

Small Business Taxes: Due Dates for Washington State

Business tax due dates in the state of Washington are as follows:

• Monthly. These returns are generally due by the 25th of the following month.  
• Quarterly. Returns submitted quarterly are due by the last day of the month for a typical quarter.  
• Yearly. Annual returns are due by January 31st of the following year.

Let the Accounting Experts Help You Build a Business in Washington State

Operating in the state of Washington offers numerous benefits as long as you stay on top of the complex tax regulations impacting your business. Staying compliant in Washington is easier said than done, which is why so many owners and entrepreneurs trust 1-800Accountant, America’s leading virtual accounting firm for small businesses, for their small business needs. 

Whether you need small business taxes, tax advisory, or any of our professional accounting services, we have the solution you need at a price that works within your budget. Schedule a quick consultation—usually 30 minutes or less—to learn how we can help your Washington-based small business.