State hubs
Washington small business taxes: B&O rates, sales tax, license, annual report and 2026-2027 payroll rates
Every Washington State tax and filing a small business deals with: the B&O gross receipts tax and its rates, 6.5% state sales tax, the $12,000 business license trigger, Secretary of State fees and annual report, UI wage base and Paid Leave premiums for 2026 and 2027, personal property tax and capital gains.
Prepared by Aldro Accounting · Updated · Sources checked
The quick answer
Washington businesses pay the Business and Occupation (B&O) tax to the Department of Revenue on gross receipts, with no deduction for labor, materials or other costs: 0.471% for retailing, 0.484% for manufacturing and wholesaling, and 1.5% for service income under $1 million on the October 2026 return. Retailers also collect the 6.5% state sales tax plus local rates. A business license is required once gross income reaches $12,000 a year.
Washington business taxes at a glance
Washington's main business taxes run through four agencies: the Department of Revenue (DOR) for B&O, sales tax and the business license, the Secretary of State for formation and annual reports, the Employment Security Department (ESD) for unemployment insurance and Paid Leave, and county assessors and treasurers for personal property tax.
Business license and UBI number
Register with DOR and get a business license if your gross income is $12,000 a year or more. You also need one if you use a name other than your full legal name, plan to hire employees within 90 days, sell something that requires collecting sales tax, or need a city, county or state endorsement.
Once registered, you get a nine-digit Unified Business Identifier (UBI), which is generally also your DOR account ID. Corporations, LLCs and LLPs file with the Secretary of State before the license application.
Online applications take about 10 business days, plus 2 to 3 weeks if there are city or state endorsements. Mailed applications can take up to six weeks. Paying by card in My DOR adds a 2.96% service fee, minimum $1.
Completing the hiring section registers the business for workers' compensation with the Department of Labor & Industries and unemployment insurance with ESD.
The B&O tax
The B&O tax is a gross receipts tax measured on the value of products, gross proceeds of sale or gross income. There are no deductions for labor, materials, taxes or other costs of doing business.
Scroll sideways to see all columns.
| Classification | Rate |
|---|---|
| Retailing | 0.471% |
| Manufacturing | 0.484% |
| Wholesaling | 0.484% |
| Service & other activities, under $1 million in the prior year | 1.5% |
| Service & other activities, $1 million to $4,999,999.99 in the prior year | 1.75% |
| Service & other activities, $5 million or more in the prior year | 2.1% |
| Royalties | 1.5% |
The service rate depends on prior-year income. The October 2026 return lists the rates in the table.
The 2026 legislature passed ESSB 6346 (Chapter 238, Laws of 2026), which increases the small business B&O tax credit, raises the registration threshold and changes exclusions from the high-grossing business surcharge.
Sales tax, and the 2025 change for services
Retail sales tax is a state rate of 6.5% plus a local rate from 0.5% to 2.4%, depending on location. Sales invoices must be given for all purchases, with the sales tax separately stated.
Under ESSB 5814, certain services became subject to retail sales tax on October 1, 2025. DOR's penalty relief program waives certain penalties on uncollected sales tax and unpaid use tax from those changes for reporting periods from October 1, 2025 through December 31, 2026, for businesses that apply by September 30, 2027.
Unpaid tax on the excise return draws delinquent penalties at the rates printed on the return (9%, 19% and 29%), and a 5% assessment penalty may apply if a return is substantially underpaid.
Secretary of State: formation, initial and annual reports
Forming or registering an LLC, PLLC, profit corporation, professional service corporation, LLP, LP, LLLP or social purpose corporation costs $180, plus an online processing fee if filed online through CCFS. Expedited service is $100 per entity, generally within three working days, and same-day service is $150.
An initial report is due within 120 days of formation. It's free if filed with the formation document, or $10 if filed separately.
Every domestic and foreign entity files an annual report by the last day of the month it was formed or registered, and can file up to 180 days early. The fee is $70 for profit entities including LLCs, plus a $25 delinquency fee if the status is delinquent. Nonprofit corporations under RCW 24.03A pay $60, or a reduced fee of $20 with a certification of gross revenue under $500,000.
Payroll: unemployment insurance and Paid Leave
Employers pay unemployment tax on the first $78,200 paid to each employee in 2026 and the first $82,000 beginning in 2027.
The Paid Family & Medical Leave premium is 1.13% in 2026 and 1.2% starting January 1, 2027. Employers pay 29.3% of the premium and employees 70.7%. Businesses ESD classifies as having fewer than 50 employees, calculated each September 30, don't have to pay the employer portion but must still collect the employee premium.
Personal property tax and capital gains
A business using personal property that isn't exempt completes a Personal Property Tax Listing Form with the county assessor by April 30 each year, listing taxable property in the county as of noon on January 1. Exemptions include business inventories, custom software and personal property accounts valued under $500.
Property tax is due April 30 and October 31, or in full by April 30 if $50 or less. After April 30, delinquent tax draws 1% interest a month, a 3% penalty if still unpaid on June 1, and an additional 8% penalty on amounts still owing December 1.
Washington's capital gains tax applies only to individuals, not business entities, but owners of pass-through or disregarded entities may owe it on gains from the entity's sales. Payments are typically due April 15, and from tax year 2026 they can be prepaid up to six months early, starting October 15, 2026 for returns due April 15, 2027.
Aldro's flat yearly price covers the business's federal returns and its Washington state excise and B&O returns, plus city business tax returns such as Seattle, Bellevue, Tacoma, Spokane and Vancouver. Our team prepares and files them.
Worked example
A Seattle-area consultant earned $300,000 in service income in 2025, under $1 million, so the service B&O rate on her October 2026 return is 1.5%. On $25,000 of service income that month, gross B&O tax is $375 before any small business credit, with no deduction for her software or contractor costs. She has three employees, so ESD classifies the business as under 50 employees: she withholds the employee share of the 1.13% Paid Leave premium but doesn't pay the employer share.
Common questions
What is the B&O tax rate in Washington?
On the October 2026 return: 0.471% for retailing, 0.484% for manufacturing and wholesaling, and 1.5%, 1.75% or 2.1% for services depending on prior-year income.
When do I need a Washington business license?
When gross income reaches $12,000 a year, or if you use a trade name, plan to hire within 90 days, collect sales tax or need an endorsement.
When is the Washington annual report due and what does it cost?
By the last day of the month the business was formed, filed up to 180 days early. $70 for profit entities including LLCs, plus $25 if delinquent.
Does my LLC owe Washington capital gains tax?
Not the entity. The tax applies to individuals, but owners of pass-through or disregarded entities may owe it on the entity's gains.
What are Washington's 2026 and 2027 payroll rates?
Unemployment tax on the first $78,200 per employee in 2026 and $82,000 in 2027. Paid Leave premium 1.13% in 2026 and 1.2% in 2027.
When is Washington personal property tax due?
The listing form goes to the county assessor by April 30. Tax is paid April 30 and October 31, or in full by April 30 if $50 or less.
The cheapest way to get your business taxes done: $399 flat.
Business tax filing is $399 USD a year, and it covers everything tax for that year.
How it works
- Tell us about your business. A two-minute form. No payment is collected through it.
- Get your next steps by email. We’ll email you the next steps within one business day. After you sign up we’ll send you a secure upload link for your documents.
- We file it. Our team prepares and files your return. Add bookkeeping for $20 a month if you want it.
What's included
$399 a year covers everything tax for that tax year.
- Every business return for the year. All the federal and state or provincial business returns you need for the tax year: Schedule C, 1065, 1120-S, 1120 and their state returns in the US; T2, or T1 with T2125, in Canada.
- More than one state. Multi-state returns are included at the same price.
- Your personal return. The owner’s personal return (1040 or T1) is included when it’s needed for the business income.
- Quebec. Quebec returns (CO-17, TP-1 and TP-80) are included. Our Quebec pages are in French, and our team works with you in English.
- Extensions and reminders. Extensions (Form 7004 or 4868) and quarterly estimate reminders are included.
- Information returns. 1099-NEC, T4/T4A and T5018 slips are included in the tax price.
- City and excise returns. City and local business tax returns, and state excise returns such as Washington B&O, are included in the yearly price.
- Franchise tax reports. State franchise tax reports, such as the Texas franchise tax report, are included.
- Estimated tax and instalment amounts. We work out your quarterly estimated tax payments in the US, or your CRA instalments in Canada, and tell you what to pay and when.
- Unfiled past years. Each unfiled prior-year return is $399 per tax year, the same flat price.
- Bookkeeping at $20 a month. Unlimited bank and card accounts, monthly reconciliation and monthly statements.
Basic inventory tracking for online stores, such as Shopify, is included. Full cost-of-goods reconciliation is quoted separately. Payroll processing and sales-tax filing aren’t included in bookkeeping. Prices are in USD. Our team prepares and files your return.
Sources
- WA DOR: Business tax basics · checked October 31, 2026
- WA DOR: Apply for a business license · checked October 31, 2026
- WA DOR: Apply for a new business license (My DOR help) · checked October 31, 2026
- WA DOR: Combined Excise Tax Return, October 2026 · checked October 31, 2026
- WA DOR: Penalty relief for sales tax on services · checked October 31, 2026
- WA DOR: 2026 tax legislation · checked October 31, 2026
- WA Secretary of State: Filings, forms and information · checked October 31, 2026
- WA Secretary of State: Annual reports · checked October 31, 2026
- ESD: Unemployment taxable wage base · checked October 31, 2026
- ESD: Paid Leave premium for 2027 · checked October 31, 2026
- WA DOR: Personal property tax · checked October 31, 2026
- WA DOR: Property tax · checked October 31, 2026
- WA DOR: Capital gains tax FAQs · checked October 31, 2026
This guide explains general rules from the sources listed. It isn’t tax advice for your situation.