Washington State Business and Occupation (B&O) Tax for self-employed individuals. Covers gross receipts tax classifications (service/other, retailing, wholesaling, manufacturing), B&O tax rates, small business credit (SBC), city B&O taxes, and filing frequencies on the Combined Excise Tax Return. Primary source: RCW 82.04.
Source-cited draft.Written from sources but not reviewed by a licensed practitioner, so it may be incomplete or wrong. General reference only; don't file or take a position on it without professional review.
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Every figure is drawn from this Tax Guide and cited to its source.
Retail sales tax
Refused -- separate skill: wa-sales-tax
Use tax computation
Refused -- out of scope
Insurance premiums tax
Refused -- out of scope
Real estate excise tax
Refused -- out of scope
City B&O tax return preparation
Refused -- each city has its own return
Multi-activity tax credit (MATC) beyond basic explanation
Refused -- out of scope beyond basic explanation
International fuel tax agreement
Refused -- out of scope
Timber tax
Refused -- out of scope
Filing obligation
Any person, business, or organization engaging in business activity in Washington is subject to B&O tax, regardless of whether the activity is profitable. There is no minimum filing threshold -- if you do business in Washington, you must register and file.RCW 82.04.220
Registration requirement
All businesses must register with the Washington Department of Revenue (DOR) before conducting business. Registration is free via the Business Licensing Service (BLS).
Obligation category: IT (Income Tax equivalent -- gross receipts) Functional role: Computation + Return Status: Complete
This is a Tier 2 content skill for computing Washington's Business and Occupation Tax. Washington has no personal income tax; instead, it imposes a gross receipts tax (B&O) on almost all business activity. The B&O tax is levied on gross income -- there is no deduction for costs of doing business, labor, materials, or overhead.
In scope:
Out of scope (refused):
Retail sales tax (separate skill: wa-sales-tax)
Use tax computation
Insurance premiums tax
Real estate excise tax
City B&O tax return preparation (each city has its own return)
Multi-activity tax credit (MATC) beyond basic explanation
International fuel tax agreement
Timber tax
Retail sales tax — Refused -- separate skill: wa-sales-tax
Use tax computation — Refused -- out of scope
Insurance premiums tax — Refused -- out of scope
Real estate excise tax — Refused -- out of scope
City B&O tax return preparation — Refused -- each city has its own return
Multi-activity tax credit (MATC) beyond basic explanation — Refused -- out of scope beyond basic explanation
International fuel tax agreement — Refused -- out of scope
Timber tax — Refused -- out of scope
Filing frequency (WAC 458-20-22801)
| Gross income | Filing frequency | Source |
|---|---|---|
| Less than $28,000/year and less than $4,200/month tax liability | Annual (due April 15) | WAC 458-20-22801 |
| $28,000 -- $420,000/year | Quarterly (due last day of month following quarter) | WAC 458-20-22801 |
| Over $420,000/year | Monthly (due 25th of following month) | WAC 458-20-22801 |
B&O tax rate schedule (2025) (RCW 82.04.250; RCW 82.04.270; RCW 82.04.240; RCW 82.04.290(2); RCW 82.04.260; RCW 82.04.261)
| Classification | Rate | RCW |
|---|---|---|
| Retailing | 0.471% | RCW 82.04.250 |
| Wholesaling | 0.484% | RCW 82.04.270 |
| Manufacturing | 0.484% | RCW 82.04.240 |
| Service and Other Activities | 1.5% if prior-year taxable income < $1M; 1.75% if $1M–$4,999,999.99; 2.1% if $5M+ | RCW 82.04.290(2) |
| Printing/publishing | 0.484% | RCW 82.04.260 |
| Travel agents, insurance agents | 0.275% | RCW 82.04.260 |
| Real estate brokers | 1.50% | RCW 82.04.290(2) |
| Royalty income | 1.50% | RCW 82.04.290(2) |
| International services (qualifying) | 0.275% | RCW 82.04.261 |
Small Business Credit (SBC) (RCW 82.04.4451)
| Item | Amount | Source |
|---|---|---|
| Maximum credit (service/other at 1.5%) | $70 per month / $210 per quarter / $840 per year | RCW 82.04.4451 |
| Phase-in range (service/other) | Gross income $0 -- $250,000/year | RCW 82.04.4451 |
| Phase-out complete | Gross income > $250,000/year | RCW 82.04.4451 |
Classification of activity
| Activity | Classification |
|---|---|
| Selling tangible goods to end consumers | Retailing |
| Selling tangible goods to other businesses for resale | Wholesaling |
| Making/fabricating goods | Manufacturing |
| Providing professional services (consulting, legal, IT, design) | Service/Other |
| Software development services | Service/Other |
| Selling prewritten (canned) software | Retailing |
City B&O taxes (FileLocal)
| City | Rate (service/other) | Filing |
|---|---|---|
| Seattle | 0.415% (most services) | FileLocal or city portal |
| Tacoma | 0.200% | FileLocal |
| Bellevue | 0.150% | FileLocal |
| Everett | 0.100% | FileLocal |
Input: Software consultant, all service income in WA. Gross income: $100,000/year. Expected: B&O tax: $100,000 x 1.5% (assuming prior-year taxable income < $1M) = $1,500. SBC: $840 x (1 - ($100,000 - $125,000)/$125,000) -- since $100,000 < $125,000, full credit = $840. Net tax: $660.
Input: Consultant with $300,000 gross income, all service/other. Expected: B&O tax: $300,000 x 1.5% (assuming prior-year taxable income < $1M) = $4,500. SBC: $0 (above $250,000). Net tax: $4,500.
Input: Online retailer. Gross receipts from WA sales: $200,000. Expected: B&O tax: $200,000 x 0.471% = $942. SBC for retailing computed separately.
Input: Software company. Canned software sales: $150,000 (retailing). Custom development: $100,000 (service/other). Expected: Retailing B&O: $150,000 x 0.471% = $706.50. Service B&O: $100,000 x 1.5% (assuming prior-year taxable income < $1M) = $1,500. SBC computed per classification. Total before SBC: $2,206.50.
Input: Consultant with $200,000 gross income and $80,000 in expenses. Expected: B&O tax on FULL $200,000, NOT $120,000. Tax: $200,000 x 1.5% if prior-year taxable income < $1M; 1.75% if $1M–$4,999,999.99; 2.1% if $5M+ = $3,000.
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Other Washington computations in the OpenAccountants Tax Library.
Filing frequency
| Gross income | Filing frequency | Source | |-------------|------------------|--------| | Less than $28,000/year and less than $4,200/month tax liability | Annual (due April 15) | WAC 458-20-22801 | | $28,000 -- $420,000/year | Quarterly (due last day of month following quarter) | WAC 458-20-22801 | | Over $420,000/year | Monthly (due 25th of following month) | WAC 458-20-22801 |WAC 458-20-22801
B&O tax rate schedule (2025)
| Classification | Rate | RCW | |---------------|------|-----| | Retailing | 0.471% | RCW 82.04.250 | | Wholesaling | 0.484% | RCW 82.04.270 | | Manufacturing | 0.484% | RCW 82.04.240 | | Service and Other Activities | 1.5% if prior-year taxable income < $1M; 1.75% if $1M–$4,999,999.99; 2.1% if $5M+ | RCW 82.04.290(2) | | Printing/publishing | 0.484% | RCW 82.04.260 | | Travel agents, insurance agents | 0.275% | RCW 82.04.260 | | Real estate brokers | 1.50% | RCW 82.04.290(2) | | Royalty income | 1.50% | RCW 82.04.290(2) | | International services (qualifying) | 0.275% | RCW 82.04.261 |RCW 82.04.250; RCW 82.04.270; RCW 82.04.240; RCW 82.04.290(2); RCW 82.04.260; RCW 82.04.261
Small Business Credit (SBC)
| Item | Amount | Source | |------|--------|--------| | Maximum credit (service/other at 1.5%) | $70 per month / $210 per quarter / $840 per year | RCW 82.04.4451 | | Phase-in range (service/other) | Gross income $0 -- $250,000/year | RCW 82.04.4451 | | Phase-out complete | Gross income > $250,000/year | RCW 82.04.4451 |RCW 82.04.4451
SBC purpose and computation approach
The SBC is designed to reduce the tax burden on small businesses. It is computed separately for each B&O classification. The credit phases out as gross income approaches $250,000 per year.RCW 82.04.4451
SBC formula (service/other, annual)
If gross income <= $125,000: full credit ($840/year). If gross income > $125,000 and <= $250,000: credit = $840 x (1 - (gross income - $125,000) / $125,000). If gross income > $250,000: no credit.RCW 82.04.4451
Classification of activity
| Activity | Classification | |----------|---------------| | Selling tangible goods to end consumers | Retailing | | Selling tangible goods to other businesses for resale | Wholesaling | | Making/fabricating goods | Manufacturing | | Providing professional services (consulting, legal, IT, design) | Service/Other | | Software development services | Service/Other | | Selling prewritten (canned) software | Retailing |
Gross income computation
For each classification, total the gross income earned during the reporting period. Gross income means the TOTAL amount received -- no deductions for expenses, COGS, or labor.
B&O tax formula
For each classification: Gross income x applicable rate = B&O tax.
Apply SBC
Compute the SBC for each classification based on annualized gross income in that classification. Apply as a reduction to the tax.
Other credits
Multiple Activities Tax Credit (MATC): prevents pyramiding when the same product is subject to B&O tax at multiple stages (e.g., manufacturing AND selling). The MATC allows a credit for the lower-rate classification's tax. Other specialized credits (high-technology R&D, etc.).
Total tax due formula
Sum of all classifications' tax minus credits = total B&O tax due.
Reporting
B&O tax is reported on the B&O section of the Combined Excise Tax Return alongside retail sales tax and use tax.
No deductions
The B&O tax is on GROSS income, not net income. There is no deduction for wages, rent, materials, COGS, or any other business expense. This is the fundamental difference from an income tax.RCW 82.04.080
Multiple classifications reporting
A business may have income in multiple B&O classifications. Each must be reported separately at its respective rate. For example, a software company that sells canned software (retailing at 0.471%) and provides custom development services (service/other at 1.5% if prior-year taxable income < $1M; 1.75% if $1M–$4,999,999.99; 2.1% if $5M+) must separate these revenue streams.
Digital goods classification
Selling prewritten software (even digitally delivered): retailing (0.471%). Custom software development: service/other (1.5% if prior-year taxable income < $1M; 1.75% if $1M–$4,999,999.99; 2.1% if $5M+). SaaS: generally service/other (1.5% if prior-year taxable income < $1M; 1.75% if $1M–$4,999,999.99; 2.1% if $5M+), though classification continues to evolve.
Interstate and foreign sales deduction
Gross income from sales delivered outside Washington may be deductible for B&O purposes if the taxpayer does not have nexus in the destination state. This is the Interstate and Foreign Sales deduction under RCW 82.04.4286. Verify nexus carefully.RCW 82.04.4286
City B&O taxes
| City | Rate (service/other) | Filing | |------|---------------------|--------| | Seattle | 0.415% (most services) | FileLocal or city portal | | Tacoma | 0.200% | FileLocal | | Bellevue | 0.150% | FileLocal | | Everett | 0.100% | FileLocal |FileLocal
City B&O taxes not on state return
Several Washington cities impose their own B&O taxes in addition to the state B&O tax. City B&O taxes are NOT reported on the state Combined Excise Tax Return. They are filed separately, often through the FileLocal portal.
Occasional sale exemption
The occasional sale of tangible personal property is generally not subject to B&O tax if the seller does not engage in the business of selling such property. This does not apply to service income.
Economic nexus threshold
$100,000RCW 82.04.067
P-1
Do NOT deduct business expenses from gross income for B&O computation. The tax is on gross receipts.
P-2
Do NOT apply a single B&O rate to all income. Each classification has its own rate.
P-3
Do NOT claim the SBC for classifications where annual gross income exceeds $250,000.
P-4
Do NOT report city B&O taxes on the state Combined Excise Tax Return. They are separate filings.
P-5
Do NOT confuse B&O tax with retail sales tax. They are separate obligations; a business may owe both.
P-6
Do NOT assume SaaS classification is settled. Flag for reviewer if SaaS revenue is material.
Rendered from the canonical facts model. General reference only — confirm with a qualified professional before acting.
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