Sales Tax > Glossary > B&O Tax
B&O Tax, or Business and Occupation Tax, is a gross receipts tax levied by certain states in the United States, primarily Washington, on businesses for the privilege of conducting business within the state, calculated based on total revenue rather than profit.
The Business and Occupation (B&O) Tax is a unique tax levied by the state of Washington on businesses for the privilege of conducting business within the state. Unlike traditional sales tax, which is charged to consumers, B&O Tax is based on gross receipts from business activities. This means that all revenue generated by a business, regardless of expenses or profits, is subject to this tax. Understanding B&O Tax is crucial for businesses operating in Washington to ensure compliance and avoid penalties.
B&O Tax calculation involves applying specific rates to gross receipts from various business activities. The rates vary depending on the type of business activity—such as retailing, wholesaling, or services—and can range from 0.471% to 1.5%. Businesses must accurately report their total gross income and apply the appropriate rate to determine their tax liability. Keeping detailed records and understanding applicable deductions can significantly impact overall tax obligations.
B&O Tax differs fundamentally from sales tax in its application and calculation method. While sales tax is collected at the point of sale from consumers based on taxable goods or services sold, B&O Tax applies directly to a business’s gross income without regard for profit margins or expenses incurred. Additionally, sales tax rates are uniform across many states while Washington’s B&O rates vary by industry type, making it essential for businesses to understand these distinctions when planning their financial strategies.
B&O Tax applies broadly across various industries in Washington State; virtually any entity engaged in business activities within state borders may be subject to this tax. This includes sole proprietors, partnerships, corporations, and even non-profits that generate revenue through commercial activities. It’s important for all businesses operating in Washington—regardless of size—to assess their potential liability under the B&O framework.
Certain exemptions and deductions can significantly reduce a business’s exposure to B&O Tax liabilities in Washington State. Common exemptions include income derived from certain types of nonprofit organizations or specific agricultural products sold directly by farmers. Additionally, deductions may apply for bad debts or certain types of investment income that do not qualify as gross receipts under the law. Businesses should consult with a qualified accountant familiar with local regulations to maximize available benefits.
These guides are a reference point only and may need additional context for your specific application to be compliant. Contact a registered tax professional in your area for accurate information that applies to your specific situation.
⟵ Audit | Bulk Sales Law ⟶
Want to explore further? Try our blog.
Looking for tax solutions for your store?
Discover our full range of digital tax solutions & products.
WooCommerce and its respective logos are a trademark of Automattic, Inc. Sales Tax USA is not affiliated with WooCommerce. Sales tax laws are subject to change at any time. For tax advice regarding your business, always contact a certified tax expert.
Ⓒ Sales Tax USA 2016-2025. All Rights Reserved.
Served in 0.870 seconds by Cloudways.
Made in NYC by Brisbane Agency.
