Intermediate Quick Answer
What is Washington's B&O tax and how is it different from sales tax?
⚡ TL;DR
Washington's B&O tax is a gross receipts tax paid by the business — not collected from customers — at approximately 0.471% for retail and 1.5% for services. Remote sellers above $100,000 in Washington gross receipts owe both sales tax and B&O tax, filed on the same Combined Excise Tax Return. The B&O obligation surprises most sellers when they first register.
B&O is a tax on the business, not the customer, and it stacks on top of Washington’s sales tax obligations for remote sellers.
Key takeaways
- B&O tax definition: a gross receipts tax on the privilege of doing business in Washington; calculated on total gross revenue attributable to Washington business activity, not on profit or net income
- Not collected from customers: B&O is a cost of doing business, like income tax; sellers pay it from their own revenue; it’s not added to customer invoices as a line item
- Rates by classification:
- Retailing: 0.471% of gross retail sales
- Wholesaling: 0.484% of gross wholesale sales
- Service businesses: 1.5% of gross service revenue
- Manufacturing: 0.484%
- Remote seller B&O nexus: Washington established economic nexus for B&O tax at the same time as for sales tax; the threshold is $100,000 in Washington gross receipts; remote sellers above this must file B&O returns in addition to sales tax returns
- Combined filing: Washington sales tax and B&O tax are reported on the same return (the Combined Excise Tax Return); sellers file one return covering both obligations
- B&O deductions and credits: Washington allows various B&O deductions (sales for resale, certain interstate sales, bad debts); the Small Business B&O Tax Credit reduces or eliminates B&O for businesses with annual gross receipts under approximately $125,000
- Why it surprises remote sellers: most sellers know about Washington’s 6.5% state sales tax; they’re often caught off-guard by the additional B&O obligation on the same Washington revenue
- No B&O equivalent in most states: Washington, Ohio (CAT), Oregon (CAT for large businesses), and a few others impose gross receipts taxes on business; most states don’t, making Washington’s B&O unfamiliar to sellers from other states
Frequently asked questions
What is Washington's B&O tax?
Washington's Business and Occupation (B&O) tax is a gross receipts tax imposed on businesses for the privilege of conducting business in Washington. It's calculated on gross business income (not profit) at varying rates depending on the classification of business activity. Retailers pay approximately 0.471%; service businesses pay approximately 1.5%. B&O tax is a seller-side tax paid by the business; it's not collected from customers.
Do remote sellers owe Washington B&O tax?
Yes, if they meet Washington's economic nexus standards. Washington applies both its sales tax economic nexus threshold ($100,000 or 200 transactions) and a separate B&O tax economic nexus standard. Remote sellers above the threshold must register with the Washington DOR, collect and remit sales tax, and also file and pay B&O tax on their Washington gross receipts.
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