Washington B&O Tax Changes for 2020
November 21, 2019
Washington responds to Wayfair
Do you do business in Washington? Washington, unlike many other states, does not have an income tax. However, the State does impose a gross receipts tax called the Business and Occupation Tax (B&O).
B&O tax is calculated on the gross income from activities within the State. In response to Wayfair, beginning Jan. 1, 2020, the nexus threshold for all B&O tax classifications and sales tax collection will be $100,000 of combined gross receipts per calendar year for businesses without a physical presence.
Services & Other Activities surcharge
On May 21, 2019, Washington Governor Jay Inslee signed into law HB 2158 which will increase Washington’s Business and Occupation tax (B&O) surcharges on the “Service & Other Activities” B&O tax classification.
Beginning with business activities occurring on or after January 1, 2020, HB 2158 will impose an increase to B&O tax surcharges for the “Services and Other Activities” classification – increased rate from 1.5% to 1.8% for any person primarily engaged within Washington in any combination of over 40 enumerated activities. The additional .3% is referred to as “Workforce Education Surcharge” and will be calculated on the Combined Excise Tax Return.
Additional tax imposed on Financial Institutions
Legislation also passed HB 2167 imposing an additional tax on “specified financial institutions” for B&O tax. Beginning January 1, 2020, financial institutions that are members of a consolidated financial institution group reporting annual net income of at least $1 billion for the previous calendar year are subject to an additional tax of 1.2%.
Small Business B&O Tax Credit
As a larger number of taxpayers doing business in Washington will be required to file the B&O tax return due to the lower nexus threshold, there may also be increased opportunities for businesses below a certain B&O tax liability to qualify for the “Small Business B&O Tax Credit.” The amount of the tax credit varies depending on the amount of B&O tax due for the various B&O classifications. If you are eligible for the credit, Washington’s online system will calculate your small business credit automatically when electronically filing. However, if your software is not calculating or you would like to confirm eligibility or credit amount, you can get more information at the link below or contact our office.
To learn more, please go to https://dor.wa.gov/find-taxes-rates/tax-incentives/credits#SBC
Our expert team of state and local tax professionals at Geffen Mesher is ready and prepared to help navigate these changes for your business.