WA B&O tax in plain English
Who owes it, the current rates by classification, and how the 2025 tiered service rate changed things.
Informational only. This guide is general information for Pacific Northwest business owners and customers — not individualized legal, tax, or financial advice. Rules, fees, and rates change. Confirm details with the official sources listed below or with a licensed professional before acting.
What it is
Washington's Business & Occupation tax is a gross receipts tax — you pay a percentage of revenue, not profit. There is no deduction for ordinary business expenses.
Current rates by classification
| Classification | Rate | | -------------- | ---- | | Retailing | 0.471% | | Wholesaling | 0.484% | | Manufacturing | 0.484% | | Service and other activities — prior-year WA taxable income under $1M | 1.5% | | Service and other activities — $1M to just under $5M | 1.75% | | Service and other activities — $5M and above | 2.1% |
The big 2025 change: Service and Other Activities used to be a single rate. Effective October 1, 2025, it became the three-tier structure above, based on your prior-year Washington taxable income. If you're a solo consultant, marketing shop, bookkeeper or similar, you are almost certainly in the 1.5% tier.
Which classification is a contractor?
There is no separate "construction" B&O rate. Construction work is reported under an existing classification depending on who you're working for and what you're doing — commonly Retailing when you're building or improving for a consumer, and Wholesaling or Service and other activities in other arrangements. Check DOR's classification definitions before your first filing; getting this wrong is the single most common contractor B&O mistake.
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The small business B&O credit
Washington offers a small business B&O tax credit that reduces or eliminates the tax for lower-revenue businesses. The credit amount is calculated from a DOR table based on your tax due and filing frequency, so there's no single number to quote — pull the current monthly/quarterly/annual credit table from DOR (linked below) and read your own figure off it.
Filing schedule
DOR assigns your filing frequency — annual, quarterly or monthly — when you register, based on your estimated gross income. You can see the current breakpoints and every due date on DOR's filing frequencies page.
File even when you owe $0. A "no business activity" return still has to be filed on time, and missing it triggers penalties.
City B&O is separate
Seattle, Tacoma, Bellevue, Everett and several other Washington cities charge their own B&O tax on top of the state's, with their own rates, thresholds and returns. Check your city's revenue or finance page — this catches new owners constantly.
→ Pair with Quarterly tax checklist for solo owners.
Common questions
What is Washington's B&O tax?+
The Business & Occupation tax is a gross receipts tax — it applies to what you take in, not your profit. There are no deductions for costs, so you can owe B&O tax in a year you lose money.
How much is B&O tax for a service business in Washington?+
Service & Other Activities is tiered as of October 2025 — 1.5%, 1.75% or 2.1% depending on gross income. Retailing and wholesaling use different, lower rates. Confirm your classification and current rate on the DOR rate page.
Do I still file if I made no money?+
Yes. If DOR assigned you a filing frequency you must file a return even when the amount owed is zero, or you'll be charged a late penalty.
Can small businesses reduce B&O tax?+
Washington offers a small business B&O credit that phases out as income rises, plus industry-specific credits and deductions. The credit is calculated on your return — check DOR's current credit table for the amounts.
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