Business & Occupation Tax Reform, Part III
Part III in the B&O Tax Policy Note Series
October 2008
Introduction
Taxes play an integral part in commerce—businesses and consumers take
into account the cost of taxation along with the other costs of any business or
commercial transaction when determining their action. But taxes, and the way
they are collected, also play a huge role when business owners decide where and
how to set up a business.
In Washington state, there are three main taxes levied upon businesses:
• The retail sales tax is levied on every transaction where a tangible piece of property or service is sold to consumers or businesses.
• Property taxes are levied every year against property assets owned by both personal land owners or owners of a business.
• The Business and Occupation Tax (B&O)—an annual gross receipts tax that businesses pay during the daily activities, or transactions, of running a business.
Washington’s B&O tax is the second largest tax source for the state. In fiscal year 2007, B&O tax collections totaled $2.679 billion, which represented approximately 13 percent of state revenue sources within the general fund. Almost all firms doing business in the state of Washington are subject to the state B&O tax, including corporations, partnerships, sole proprietors, and nonprofit organizations.
