WA
Washington Small Business Tax Guide
Washington's sales and B&O taxes as DOR states them, alongside federal points from the IRS. Not tax advice.
Disclaimer: This page is educational content only. Tax laws change, and your situation may differ. It is not legal, tax, or financial advice. Consult a qualified professional licensed in Washington before making filing or planning decisions.
Tax landscape for small businesses
Each Washington figure here comes word for word from the Department of Revenue (DOR), and each federal one from the IRS, with the date shown in the same paragraph or row.
The Washington Department of Revenue FAQ (Washington, checked October 31, 2026) says "The state retail sales and use tax rate is 6.5% (0.065) for everything except sales/leases of motor vehicles." It also says "Local governments also levy sales and use taxes, and their tax rates vary depending on location."
Alongside sales tax, the same FAQ (checked October 31, 2026) describes the business and occupation (B&O) tax: "The B&O tax is a gross receipts tax." "It is measured on the value of products, gross proceeds of sale, or gross income of the business." DOR's special notice on Service and Other Activities rate changes (Washington, issue date July 25, 2025) adds "Effective October 1, 2025, the business and occupation (B&O) tax has three tax rates under the Service and Other Activities classification."
Worked example, with sample figures (state rate from the Washington Department of Revenue FAQ (Washington, checked October 31, 2026)): $1,000.00 of goods taxed at "6.5% (0.065)" means $65.00 of state sales tax (1,000.00 x 0.065), for $1,065.00. DOR says local rates are added on top, so this shows the state part only.
Tax overview
Each row lists a tax area and its notes. Confirm current figures with your state's tax agency or the IRS.
| Tax type | Rate or basis | Notes |
|---|---|---|
| State retail sales and use tax | "6.5% (0.065)" | The Washington Department of Revenue FAQ (Washington, checked October 31, 2026): "Local governments also levy sales and use taxes, and their tax rates vary depending on location." |
| B&O tax, retailing | ".00471" | DOR's B&O tax classifications page (Washington, checked October 31, 2026), classification "Retailing". |
| B&O tax, services (prior-year income under $1 million) | ".015" | DOR's B&O tax classifications page (Washington, checked October 31, 2026), classification "Service & other activities (Less than $1,000,000 in the prior year)". DOR's special notice (Washington, issue date July 25, 2025): "Effective October 1, 2025, the business and occupation (B&O) tax has three tax rates under the Service and Other Activities classification." |
| B&O tax, wholesaling | ".00484" | DOR's B&O tax classifications page (Washington, checked October 31, 2026), classification "Wholesaling". |
Filing requirements
This list isn't a complete checklist for your business.
B&O tax
The Washington Department of Revenue FAQ (Washington, checked October 31, 2026) says "Virtually all businesses in Washington are subject to the B&O tax, including corporations, limited liability companies (LLCs), partnerships, and sole proprietors, whether nonprofit or for profit." Ask DOR which classification and filing frequency apply to you.
Service and Other Activities tiers
DOR's special notice on Service and Other Activities rate changes (Washington, issue date July 25, 2025) says "Effective October 1, 2025, the business and occupation (B&O) tax has three tax rates under the Service and Other Activities classification." DOR's B&O tax classifications page (Washington, checked October 31, 2026) lists "Service & other activities ($1,000,000 to $4,999,999 in the prior year)" at ".0175" and "Service & other activities ($5 million or more in the prior year)" at ".021".
Sales tax on vehicles
The Washington Department of Revenue FAQ (Washington, checked October 31, 2026) says "Sales/leases of motor vehicles are subject to a 6.8% (0.068) state retail sales and use tax."
Sales tax exemptions
The Washington Department of Revenue FAQ (Washington, checked October 31, 2026) says "Some of the most frequently used exemptions to retail sales and use taxes include:" "Groceries", "Prescription drugs", "Sales to federal government" and "Newspapers", among others.
Small firms and B&O
The same FAQ (Washington, checked October 31, 2026) says "while a small firm may be exempt from paying B&O taxes, it may have to report sales and use taxes."
Selling into Washington from another state
DOR's Marketplace Fairness page (Washington, as retrieved on November 1, 2026) says "Out-of-state businesses without a physical presence in Washington, but who make sales to Washington consumers, must follow tax collection laws and may be required to register their business in Washington." This guide doesn't state the registration threshold.
Federal self-employment tax
Schedule SE applies in several situations. One that the IRS self-employment tax page (In the US (federal), last reviewed or updated October 30, 2026) lists: "Your net earnings from self-employment (excluding church employee income) were $400 or more."
Deductions and write-offs
Confirm with your state how it treats each item.
- Self-employment tax deduction: the IRS self-employment tax page (In the US (federal), last reviewed or updated October 30, 2026) says "This deduction only affects your income tax. It does not affect either your net earnings from self-employment or your self-employment tax."
- Home office limit: the IRS simplified home office page (In the US (federal), last reviewed or updated March 2, 2026) says "Deduction cannot exceed gross income from business use of home less business expenses".
- Burden of proof: the IRS recordkeeping page (In the US (federal), last reviewed or updated May 1, 2026) says "The responsibility to substantiate entries, deductions, and statements made on your tax returns is known as the burden of proof."
Practical tips
- Look up the combined rate before you invoice. The Washington Department of Revenue FAQ (Washington, checked October 31, 2026) says "Local governments also levy sales and use taxes, and their tax rates vary depending on location."
- Know your B&O line. DOR's special notice on Service and Other Activities rate changes (Washington, issue date July 25, 2025) says "Effective October 1, 2025, the business and occupation (B&O) tax has three tax rates under the Service and Other Activities classification."
- Keep tax settings in one place. Billed's invoice software page (checked October 31, 2026) says "Save your tax rates and settings once, and Billed calculates taxes automatically when you create invoices and estimates."
- Recheck the B&O rates on DOR's classification page at the start of each year.
Frequently asked questions
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At a glance
| Topic | What DOR or the IRS says |
|---|---|
| State sales tax | "6.5% (0.065)" (DOR FAQ, Washington, checked October 31, 2026) |
| Local sales tax | "Local governments also levy sales and use taxes, and their tax rates vary depending on location." (DOR FAQ, Washington, checked October 31, 2026) |
| B&O tax | "The B&O tax is a gross receipts tax." (DOR FAQ, Washington, checked October 31, 2026) |
| Service tiers | "Effective October 1, 2025, the business and occupation (B&O) tax has three tax rates under the Service and Other Activities classification." (DOR special notice, Washington, issue date July 25, 2025) |
| Self-employment tax | "The self-employment tax rate is 15.3%." (IRS, In the US (federal), last reviewed or updated October 30, 2026) |
When this isn't for you
Written for Washington sole proprietors and small companies. Taxes set by cities or counties, payroll and audits fall outside it; ask DOR or your preparer about them.