Federal Tax ID Number
Having a Employer Identification Number, or EIN, helps separate you from your business. If you don’t have one, you will use your social security number on any business licenses, permits & tax forms. Using an EIN keeps your business at arm’s length.
State Taxes
BUSINESS & OCCUPATION TAX (B&O). With all the brouhaha about the B&O, you’d think it was more controversial than the Immaculate Reception in the 1972 AFC division playoff game.
Actually, it’s pretty straightforward. Washington doesn’t tax corporate or personal income like most states. Instead, the state taxes gross receipts. The more a company makes, the less it pays in taxes compared to states with more aggressive strategies like a tax on corporate income.
Most of the tax classifications are below one percent and there is a threshold where small companies and startups don’t have to pay these taxes, though they must still file their quarterly reports with the Department of Revenue. Many companies can also take advantage of tax credits and exemptions that lower the overall B&O tax bill.
SALES TAX. Businesses collect sales taxes from customers for most retail products, construction activities and some services. The sales tax is destination-based, meaning businesses charge the tax rate for the location where the product or service is delivered.
USE TAX. This tax is applied to businesses when purchases are made without paying sales tax. For instance, if you purchase goods from another state that doesn’t have a state sales tax (Oregon is one) or has one that is lower than Washington’s, a use tax could be assessed.
REAL AND PERSONAL PROPERTY TAXES. This tax is levied on the value of real estate, buildings and other structures, furnishings, equipment and other assets. These are collected by individual counties rather than the Department of Revenue.
INDUSTRY-SPECIFIC TAXES. The state collects other taxes, such as taxes on hotel and motel stays, rental cars, cigarettes, etc.
Most businesses need to file an excise tax return with the Department of Revenue. Your filing frequency is assigned after you submit your Business License Application, which is based on an estimate of the amount of tax you will owe. You can file your taxes electronically using the Department of Revenue’s online filing system.
We don’t blame you if you’re ready to head to the showers in the locker room at this point. But there are a few more taxes to cover. Depending on your team’s size and type, these may or may not apply to you:
Employer Taxes
If you have employees, unemployment taxes are due quarterly. Reporting and payment is generally done online through the Department of Employment Security. Taxes are calculated based on the rate provided to your business by Employment Security multiplied by each employee’s wages up to an annual maximum.
Due dates for the preceding calendar quarters are:
• April 30
• July 31
• October 31
• January 31
Workers’ Compensation
Premiums are due quarterly to the Department of Labor & Industries (L&I). These can be reported online and the due dates are the same as Unemployment Taxes. Premiums are calculated based on the classification rates provided to your business by L&I, multiplied by the hours worked by employees in that risk classification. Employers can deduct from the employees’ pay a portion of the premium amount.
License & Permit Renewals
- Corporations, limited liability companies and limited partnerships must file an annual report with the Office of the Secretary of State.
- You may need to renew specialty licenses, local licenses and professional licenses annually to keep your team in the game. Be sure to keep track of your renewal dates to ensure your licenses are current to avoid additional fees and penalties. For example, if you are a contractor, you need to register with the Department of Labor & Industries. Their office can also be reached at (800) 647-0982.
- If you’re handling or selling food, you need to contact your local health department to comply with their requirements.
- If you are new to the Washington business tax system, you may want to speak with your tax professional or CPA to discuss which taxes apply to your business to ensure that you file your returns correctly.