Business and Occupation Tax in Washington, Ohio, and West Virginia
The business and occupation tax is levied in Washington, West Virginia, Ohio, and some local governments. It taxes gross income, not net income. Washington’s B&O tax uses no deductions for labor, materials, other costs, or losses. In this way, it resembles an income tax. As with sales tax, payment is always due if business is conducted. It uses the same nexus rules to determine tax liability.
B&O Tax Rates and Classifications
B&O tax rates vary by industry classification. Most fall under the 1.5% gross receipts rate. There are over 60 different taxes administered in Washington. The B&O tax applies to gross income. You pay tax on total revenue, whether profitable or not. Most pay 1.5%, but some industries have different rates. It is tracked by your Washington UBI number.
Washington State Business Taxation
Ohio has phased out corporate income tax for a gross receipts tax. Washington and Ohio are the only states with such broad-based business gross receipts taxes. But Ohio’s system has a higher threshold and lower rates.
Income Tax in Washington and Other States
Like other states that don’t collect personal income tax, Washington still has to make up for its lack of an income tax somehow. Businesses in the state are subject to a business and occupation (B&O) tax, based on gross receipts. Rates differ according to the specific business activity and are paid on either a monthly, quarterly, or annual basis. State income tax is a tax on the amount of income earned in the state you live or work in. States use income tax to pay for government services including education, health care, transportation, corrections, and low-income assistance.
Washington State Small Business Tax Credits
On the other end of the spectrum, states with higher income tax rates can impose a more substantial financial burden. Also, if you have a small business, there is a tax credit for you—one of the best things about Washington State taxes. The way it works out is that if your gross income is under a certain amount, you pay no B & O tax. As your income goes up, you get a smaller and smaller credit, until you make enough to pay the full percentage.