Gross Receipts Tax in Washington: Complete Guide 2026
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Gross Receipts Tax in Washington: Complete Guide 2026
Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed tax professional for your specific situation.
Washington State’s Business and Occupation (B&O) tax is one of the oldest and most significant gross receipts taxes in the country. Because Washington has no corporate income tax and no individual income tax on wages, the B&O tax serves as the state’s primary general business tax. It is levied on the gross receipts of virtually every business operating in the state, with rates varying by business classification. Unlike income taxes, the B&O tax applies to total revenue regardless of whether the business earns a profit, making it a critical obligation for all Washington businesses.
Washington B&O Tax Rates by Classification (2026)
| Business Classification | Rate |
|---|---|
| Retailing | ~0.471% |
| Wholesaling | ~0.484% |
| Manufacturing | ~0.484% |
| Service and other activities | ~1.50% |
| Travel agents | ~0.275% |
| International services | ~0.275% |
| Advanced computing (surcharge for large tech) | ~1.22% (additional) |
The wide rate differential between retailing (~0.471%) and services (~1.50%) means that the classification of your business activities has a significant impact on your B&O tax liability. Businesses engaged in multiple activities must report income under each applicable classification.
How the Washington B&O Tax Works
Who Must Pay
The B&O tax applies to virtually every business operating in Washington, including:
- Corporations, LLCs, and partnerships
- Sole proprietorships
- Nonprofit organizations (on their unrelated business income)
- Out-of-state businesses with Washington nexus (including economic nexus based on more than ~$100,000 in Washington receipts or more than ~200 transactions)
There is no general exemption for entity type or organizational form. The B&O tax applies even if a business operates at a loss.
Small Business Credit
Washington provides a small business B&O tax credit that effectively exempts businesses with annual gross receipts below a threshold. The credit phases out for businesses with taxable income between approximately ~$125,000 and ~$250,000 per month (the thresholds vary and are adjusted periodically). A business below the lower threshold pays no B&O tax. The credit is applied automatically when filing.
Multiple Activities Tax Credit (MATC)
Because the B&O tax applies to gross receipts at each stage of production and distribution, a business that both manufactures and sells products could be taxed twice on the same revenue. The Multiple Activities Tax Credit allows businesses to claim a credit against the tax on one activity when the same revenue has already been taxed under another classification. For example, a manufacturer that also retails its products can claim a credit on the retailing classification for amounts already reported under manufacturing.
Advanced Computing Surcharge
Washington imposes an additional surcharge on businesses engaged in advanced computing (primarily large technology companies) with worldwide gross revenue of ~$25,000,000,000 or more. The surcharge rate is approximately ~1.22% on the business’s Washington-sourced advanced computing revenue, bringing the effective rate for qualifying tech companies to approximately ~2.72% (the ~1.50% service rate plus the ~1.22% surcharge). This surcharge is specifically targeted at the largest technology enterprises.
Filing Requirements
| Requirement | Detail |
|---|---|
| Filing frequency | Monthly, quarterly, or annual (based on tax liability) |
| Monthly threshold | Required if annual tax liability exceeds approximately ~$4,800 |
| Quarterly threshold | Between approximately ~$1,050 and ~$4,800 annual liability |
| Annual threshold | Below approximately ~$1,050 annual liability |
| Filing method | Electronic filing through My DOR (Department of Revenue) |
Comparison to Other Gross Receipts and Business Taxes
| State | Tax Type | Rate | Base | Key Feature |
|---|---|---|---|---|
| Washington | B&O Tax | ~0.275%—~1.50% | Gross receipts | Multiple classifications |
| Ohio | Commercial Activity Tax | ~0.26% | Gross receipts over ~$1,000,000 | Single flat rate |
| Oregon | Corporate Activity Tax | ~0.57% | Commercial activity over ~$1,000,000 | ~$1M subtraction |
| Nevada | Commerce Tax | ~0.051%—~0.331% | Gross revenue over ~$4,000,000 | Industry-based rates |
| Texas | Franchise (margin) tax | ~0.375%—~0.75% | Revenue minus deductions | Allows cost deductions |
Washington’s B&O tax is distinctive because it allows no deduction for cost of goods sold, labor, or other business expenses. The tax is on gross receipts, not net receipts or margin.
Tips for Minimizing Washington B&O Tax
- Classify activities correctly. The difference between the retailing rate (~0.471%) and the service rate (~1.50%) is more than ~3x. Ensure each revenue stream is classified under the correct, most favorable rate.
- Claim the Multiple Activities Tax Credit. If the same revenue is taxable under more than one classification (such as manufacturing and retailing), the MATC prevents double taxation.
- Use the small business credit. Businesses with monthly taxable income below approximately ~$125,000 may qualify for a partial or full credit. Ensure you apply it on your filing.
- Monitor economic nexus thresholds. Out-of-state businesses with more than ~$100,000 in Washington receipts or more than ~200 transactions are subject to the B&O tax. Track these thresholds proactively.
- Deduct exempt transactions. Certain receipts are deductible from the B&O base, including interstate and foreign sales, certain agricultural products, and specific manufacturing inputs.
- Review the advanced computing surcharge. If your business has worldwide revenue approaching ~$25,000,000,000, evaluate whether the surcharge applies and how to plan for the ~1.22% additional rate.
- File at the correct frequency. Filing more frequently than required creates unnecessary administrative burden. Filing less frequently than required triggers penalties. Match your filing frequency to your actual tax liability.
Key Takeaways
- Washington’s B&O tax is a gross receipts tax with rates ranging from ~0.275% (international services) to ~1.50% (services and other activities), with no deductions for costs or expenses
- The tax applies to virtually every business in Washington regardless of profitability or entity type
- A small business credit effectively exempts businesses below approximately ~$125,000 per month in taxable income, with a phase-out up to approximately ~$250,000
- The Multiple Activities Tax Credit prevents double taxation when the same revenue is taxable under multiple classifications
- An advanced computing surcharge of ~1.22% applies to the largest technology companies with worldwide revenue above approximately ~$25,000,000,000
- Washington’s lack of a corporate income tax makes the B&O tax the state’s primary business tax
Next Steps
- See the full state picture at Taxes in Washington: State Tax Guide 2026
- Compare with the Washington payroll tax guide at Payroll Tax in Washington 2026
- Learn about federal business tax at Federal Income Tax Guide 2026
- Compare state tax burdens at State Income Tax Rates Comparison 2026
- Get local help: Find a CPA Near You