Washington significantly raises B&O tax rates

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May 2019

Overview

Washington State Governor Jay Inslee (D) on May 21 signed several tax bills that will significantly affect most Washington taxpayers. These bills:

  • Add surcharges to the “service and other activities” business and occupation (B&O) tax rate (ESSHB 2158);
  • Create a new B&O tax on certain financial institutions (SHB 2167);
  • Increase tax rates for international investment managers (ESB 6016);
  • Increase tax rates for tour and travel agents (ESSB 6004);
  • Replace the nonresident sales tax exemption with a voucher program (ESSB 5997); and
  • Change the state real estate tax rate from a single rate to a graduated rate structure (ESSB 5998).

The takeaway

The B&O tax rates for a number of activities in Washington have increased significantly, especially for taxpayers filing under the service and other activities classification. Accordingly, it is important to consider whether your business might be more favorably taxed if deemed to fall in a different classification. Businesses with any income taxable under the service and other activities category should review the 43 enumerated business activities to analyze the applicability of the ESSHB 2158 surcharges.

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Peter Michalowski

Peter Michalowski

State and Local Tax Leader, PwC US

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