Every state in the US has its own taxation system, so it can be difficult to determine the exact amount of taxes you need to pay. For those living or conducting business in Washington State, one of the taxes you may have to pay is the Business and Occupation (B&O) Tax. This guide will explain what the B&O Tax is, who has to pay it, and how to calculate it.
What is the B&O Tax?
The Business & Occupation Tax (B&O Tax) is a tax imposed by the State of Washington on businesses for the privilege of conducting business activities within the state. The B&O Tax is based on the gross receipts of the business, meaning that businesses that generate higher revenues will be subject to a higher B&O Tax rate.
Who has to Pay the B&O Tax?
Any business or individual engaged in business activities in Washington State is required to pay the B&O Tax. This includes both physical businesses and online businesses. Businesses that are located in other states but have taxable activities in Washington State, such as selling products or services to Washington customers, are also required to pay the B&O Tax.
How to Calculate the B&O Tax
The amount of B&O Tax you are required to pay is determined by multiplying the applicable tax rate by your business’s gross receipts. The tax rate is based on the type of business activities you are engaging in, and the rate can range from 0.001% to 0.471%.
What are the Tax Rates?
The tax rate for B&O Tax depends on the type of business activity you are engaging in. The rates are as follows:
- Retail sales: 0.471%
- Wholesaling: 0.138%
- Manufacturing: 0.484%
- Service and Other Businesses: 0.138%
- Transportation: 0.095%
- Extracting: 0.095%
- Logging: 0.095%
- Agriculture: 0.001%
Calculation Examples
Let’s say you own a retail business that generates $100,000 in gross receipts. To calculate the B&O Tax you owe, you would multiply the applicable tax rate of 0.471% by your gross receipts, which would give you a tax amount of $471.
If you own a manufacturing business that generates $500,000 in gross receipts, the B&O Tax you owe would be calculated by multiplying the applicable tax rate of 0.484% by your gross receipts, resulting in a tax amount of $2,420.
Conclusion
The Business & Occupation Tax is an important tax to consider if you are conducting business activities in Washington State. It is important to understand the tax rates and how to calculate the B&O Tax to ensure you are correctly calculating and paying your taxes.
