Washington Bookkeeping Services

Washington has no income tax, and that is the trap. What it has instead is the Business & Occupation tax — charged on gross receipts, with no deduction for costs at all. Rates depend on your classification: retailing is 0.471%, wholesaling 0.484%, and Service & Other Activities moved to a tiered structure from 1 October 2025, at 1.5% under $1 million of prior-year taxable income, 1.75% from $1 million, and 2.1% from $5 million. A consultancy billing $900,000 with $850,000 of costs still pays B&O on the full $900,000. Layer on destination-based sales tax with hundreds of local rates, and Washington rewards precise revenue records more than almost any state in the country.

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On This Page

• Washington’s small-business tax landscape
• B&O is charged on gross receipts — costs do not reduce it
• The 2025 service-rate tiers and why last year matters
• Destination-based sales tax across hundreds of rates
• Washington cities we serve
• Washington FAQs

Washington’s Small-Business Tax Landscape

Washington Department of Revenue and Secretary of State, checked 3 October 2026. B&O classifications and rates change — the Service & Other Activities tiers took effect 1 October 2025. Confirm your classification and current rate with the Department or your CPA.

B&O Is Charged on Gross Receipts — Costs Do Not Reduce It

This is the single most important thing to understand about doing business in Washington, and the one most often explained badly. The B&O tax has no equivalent of taxable profit. There is no deduction for cost of goods, wages, rent or anything else. You are taxed on what comes in.

The consequence is that two businesses with identical profit can owe wildly different amounts. A reseller turning $3 million at a 5% margin pays B&O on $3 million. A consultancy earning the same profit on $400,000 of fees pays on $400,000 — at a higher rate, but a far smaller base.

It also means revenue classification is the tax calculation. A business with both retail sales and service income reports them under different classifications at different rates, and getting the split wrong changes what is owed. That split lives in your bookkeeping, not in your tax return.

The 2025 Service-Rate Tiers and Why Last Year Matters

From 1 October 2025 the Service & Other Activities classification carries three rates rather than one: 1.5% for businesses with less than $1 million of taxable income in the prior year, 1.75% from $1 million to just under $5 million, and 2.1% at $5 million and above.

Note what the test keys off — the prior year. Your current rate is determined by a figure that is already in the books, which means an inaccurate prior year does not just misstate history, it sets this year’s rate. For a service business sitting near $1 million, the difference between a clean close and a sloppy one is a quarter of a percentage point on everything.

This is exactly the kind of thing monthly reconciliation prevents and annual clean-up cannot. Confirm your own tier with the Department of Revenue or your CPA — our job is making sure the number they rely on is right.

Destination-Based Sales Tax Across Hundreds of Rates

Washington sources sales tax to the destination. The rate is the state’s 6.5% plus whatever local rates apply where the customer receives the goods, and with hundreds of local jurisdictions those rates vary considerably across short distances.

For anyone shipping within Washington, that makes sales tax a per-transaction fact that has to be captured at the point of sale and preserved through to the return. It cannot be derived later from a revenue total. We reconcile tax collected against tax remitted every month, so the combined excise return is a report rather than a reconstruction.

Washington Cities We Serve

Dedicated local guide: Seattle — plus Spokane, Tacoma, Vancouver, Bellevue and Everett, and every corner of the state, all served remotely. Browse all locations.

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Washington Bookkeeping FAQs

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