How to File B&O Tax in Washington State

The Washington State Business and Occupation (B&O) tax is a gross receipts tax on businesses operating in the state. Unlike an income tax, it’s levied on total revenue before expenses, meaning businesses pay tax on gross income regardless of profit. This tax applies to almost all businesses, including corporations, partnerships, sole proprietorships, and LLCs, with a physical presence or economic nexus in Washington.

Understanding Your B&O Tax Liability

The B&O tax is assessed on gross receipts from business activities in Washington State. Businesses must register with the Department of Revenue (DOR) to obtain a business license and a Unified Business Identifier (UBI) number. This registration is required for B&O tax obligations and determines filing frequency.

The amount of B&O tax owed depends on how a business’s activities are classified, as different classifications have varying tax rates. Common classifications include Retailing (sales to consumers), Wholesaling (sales for resale), Manufacturing (producing items within the state), and Service and Other Activities (professional/personal services and unclassified income). A business might engage in multiple activities, requiring reporting income under several classifications.

Businesses must determine the correct classification(s) for their operations, as this impacts the tax rate. For example, the rate for Service and Other Activities is typically higher than for Retailing or Wholesaling. While the B&O tax is based on gross receipts with limited expense deductions, the state offers tax thresholds and small business deductions. Businesses with gross income below certain levels may qualify for a small business B&O tax credit, potentially reducing their tax liability to zero, though filing may still be required.

Preparing Your B&O Tax Information

Accurate financial information is crucial before filing your B&O tax return. Businesses must gather data, focusing on all gross income from activities within Washington State for the reporting period. This includes the total value of products, gross proceeds of sales, or other gross income. Maintaining records of all income sources is essential for precise reporting.

While the B&O tax is generally levied on gross receipts without deductions for most expenses, certain deductions are permitted. Common deductions include income from interstate sales, sales for resale (with a reseller permit), and certain bad debts or returns and allowances. Documentation supporting these deductions, such as reseller permits or evidence of out-of-state sales, must be available.

Organizing income by B&O tax classification is important for tax return calculation. Businesses with diverse activities must segregate gross receipts by applicable classification. The Unified Business Identifier (UBI) number and relevant tax account numbers are necessary for filing. This structured data compilation ensures accuracy and efficient return preparation.

Submitting Your B&O Tax Return

Once B&O tax information is prepared, businesses can submit their return and make payment. The primary method for filing B&O tax returns in Washington State is electronically through the My DOR portal, maintained by the Department of Revenue. This digital platform streamlines the submission process for most businesses.

To file, businesses log into their My DOR account using their credentials. Within the portal, they navigate to the excise tax return section and select the reporting period. The system guides users through entering gross income amounts for each B&O tax classification and any applicable deductions. The portal automatically calculates the tax owed based on the entered data and the corresponding rates.

Payment for the B&O tax can be made through various methods via the My DOR portal. Electronic Funds Transfer (EFT) is a common option, allowing direct withdrawal from a bank account. Credit card payments are also an option, though they may incur a convenience fee. For businesses preferring physical methods, payment by check can be mailed to the Department of Revenue.

Filing frequency for B&O tax returns varies based on a business’s estimated annual tax liability, typically monthly, quarterly, or annually. Monthly returns are due on the 25th of the following month; quarterly returns are due by the last day of the month following the end of the quarter; and annual returns are due by April 15th of the following calendar year. Timely filing and payment avoid penalties and interest. After submission, businesses find confirmation within the My DOR system, which also provides options for amending a previously filed return.