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  • Writer's pictureSummit Bookkeeping

Business and Occupation (B&O) Tax | Washington State and City of Bellingham

Updated: Feb 1

Washington state doesn’t have income tax like most states, but business owners do need to pay Business and Occupation (B&O) tax, and this is usually on a state and city level. Here’s what the B&O tax looks like for your business. 


Washington State

B&O tax is based on the gross income from business activities. This means there are very limited deductions for business-related expenses.


2024 Washington State B&O Tax Classifications

To find out your tax rate, you’ll first need to determine your business classification. The Department of Revenue groups businesses into tax classifications based on common business activities. Some businesses may fall into multiple classes. The major classifications and tax rates are:

  • Retailing: 0.471%

  • Wholesaling: 0.484%

  • Manufacturing: 0.484%

  • Service and Other Activities: 1.5%

If you’re unsure how your business is classified, the Department of Revenue provides a list of common business activities and their corresponding tax classification(s). 


Starting April 1, 2020, an additional B&O tax was implemented for those under the Service and Other Activities classification. This additional tax, created to fund workforce education, is known as the Workforce Education Surcharge. There are two tax rates for this surcharge on your tax returns:

  • Service and Other Activities ($1 million or greater in the prior year): 1.75% tax rate

  • Service and Other Activities: 1.5% tax rate


B&O Due Dates

Once you’ve registered your business with the Department of Revenue, they will provide information about filing deadlines. You may need to file monthly, quarterly, or annually depending on the projected gross receipts of your business. The due dates for each are:

  • Monthly: The 25th of the following month

  • Quarterly: The end of the month following the close of the quarter

  • Annually: April 15th

If a due date falls on a weekend or holiday, returns are due the next business day.


Credits

The Department of Revenue offers credits to certain businesses, including a Small Business B&O Tax Credit. There are two credits available under the Small Business Tax Credit depending on your taxable income and total B&O tax liability.


The Small Business Tax Credit [720] applies if:

  1. 50% or more of your taxable income was reported under Service and Other Activities, Gambling Contests of Chance, For-Profit Hospitals, and/or Scientific R&D and

  2. Your B&O tax liability is under:

  • $141 for monthly taxpayers

  • $421 for quarterly taxpayers

  • $1,681 for annual taxpayers

The Small Business Tax Credit [815] applies if:

  1. Less than 50% of your taxable income was reported under Service and Other Activities, Gambling Contests of Chance, For-Profit Hospitals, and/or Scientific R&D and

  2. Your B&O tax liability is under:

  • $71 for monthly taxpayers

  • $211 for quarterly taxpayers

  • $841 for annual taxpayers

If you qualify, the Department of Revenue provides worksheets to figure out how much your Small Business Tax Credit will be for monthly, quarterly, and annual taxpayers.


City of Bellingham

In addition to Washington state B&O taxes, Bellingham business owners will need to pay the City of Bellingham B&O taxes. These taxes fund a variety of city departments such as the police, fire, parks, and libraries. Almost all businesses in Bellingham are subject to B&O tax, including corporations, LLCs, partnerships, sole proprietors, and nonprofits. 


2024 City of Bellingham B&O Tax Classifications

Bellingham has one additional major classification: extracting. The City of Bellingham B&O Tax Rates are:

  • Retailing: 0.17%

  • Wholesaling: 0.17%

  • Manufacturing: 0.17%

  • Extracting: 0.17%

  • Services and Other Activities: 0.44%


City of Bellingham B&O Tax Due Dates

Just like state tax filings, city filings may be due annually, quarterly, or monthly. Taxpayers in Bellingham have the option to pay online using e-Check, by mail, or in person at the Finance Department in Bellingham City Hall. 


Returns must be postmarked or turned in by the due date, regardless of whether it’s a weekend or

holiday. The due dates for Bellingham’s B&O tax are:

  • Monthly: The last day of the following month

  • Quarterly: April 30th, July 31st, October 31st, January 31st 

  • Annually: April 15th

There are no taxes due for quarterly filers who have a taxable gross income after deductions of less than $5,000 a quarter and annual filers who have less than $20,000 in a year. However, even if you don’t have taxes due for the period, you must still file a tax return.


Need help?

If you need help filing and paying B&O taxes, one of our bookkeepers would be happy to schedule a consultation with you. Give us a call at (360) 756-5020 or contact us to get started.


 

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