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What income taxes apply to a Washington business?

Washington has neither corporate nor personal income tax. Washington does have a business and occupation (B&O) tax. B&O taxes gross receipts using a flat rate corresponding to the type of business you are in and applies the rate against value of products, gross proceeds of sales, or gross income of a business. So while legal business form is key in states with income tax, what matters in Washington is not form but function, so to speak. Washington publishes a rate schedule for all the taxable classifications of business from retailing to radioactive waste disposal. A business will need to file monthly, quarterly, or annually depending on estimated tax liability. Some types of business activity are exempt from B&O taxes. If a business activity is taxable, then it must be registered with the Department of Revenue. Also know that there is a Small Business Tax Credit available for businesses with a B&O liability below a threshold amount.

Multistate businesses may be subject to additional taxes. If your business is formed in Washington, but you do business in another state as well, then you may be subject to that other state’s taxes if there is a sufficient “nexus” connecting your business and that state. If your business was formed outside of Washington, but you do business in Washington as well, then even if you won’t be paying any extra income taxes, you may be subject to Washington’s B&O tax. Contact Bjornson Jones Mungas to determine whether or not your out-of-state business dealings constitute a nexus sufficient to merit additional taxation. Careful tax planning is key to a successful business, and we are here to help.

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