Business and occupation tax

Business and occupation tax

The Business and Occupation tax (often abbreviated B & O tax) is a type of tax levied by the U.S. state of Washington. It is a type of gross receipts tax because it is levied on gross income, rather than net income. While deductions are not permitted for labor, materials, or other overhead expenses, the State of Washington does allow certain deductions, exemptions, and credits, by statute.

Tax rates

The rate of taxation is not uniform for all businesses. Rather, different types of businesses are taxed at different rates, depending upon their classification by the Washington State Legislature and the Washington Department of Revenue. [ [http://dor.wa.gov/Content/FileAndPayTaxes/BeforeIFile/doingBus_CommonBusActivities.aspx Tax classifications for common businesses] ] [ [http://dor.wa.gov/Content/FileAndPayTaxes/BeforeIFile/Def_TxClassBandO.aspx Definitions of tax classifications for the B & O tax] ] Service industry businesses have the heaviest tax burden, with a tax rate of 1.5%, more than double the other major classifications.

Major B & O Classifications and their tax rates

Specialized B & O Tax Classifications

Exemptions, deductions, and credits

Income from exempt activities need not be listed on the B & O tax return. Items claimed as "deductions", however, must be listed as part of gross income before it can be taken as a deduction.

Tax credits for the B & O tax can be due to a taxpayer who overpaid his/her taxes for the prior fiscal year. Additionally, the Legislature has specially created tax credits for certain types of activities.

All exemptions, deductions, and credits are provided for by Chapter 82.04 of the Revised Code of Washington (the chapter which is the legislative basis for the B & O tax) and Title 458 of the Washington Administrative Code (the regulations of the Washington Department of Revenue). Certain provisions of these laws operate in a similar manner as the Internal Revenue Code and U.S. Treasury Regulations. For example, bad debt can be deducted from the B & O tax in much the same way as it can be deducted from the federal income tax [ [http://apps.leg.wa.gov/RCW/default.aspx?cite=82.04.4284 RCW 82.04.4284: Deduction - Bad debts] ] [ [http://apps.leg.wa.gov/WAC/default.aspx?cite=458-20-196 WAC 458-20-196: Bad debts] ] .

References

External links

* [http://dor.wa.gov/docs/pubs/excisetax/bo_pubutil_littertax/bofs.pdf Washington Department of Revenue brochure on the B & O tax] — provides basic information on tax rates, exempt activities, deductions, and credits.
* [http://dor.wa.gov/content/findtaxesandrates/bandotax/ Washington Dept. of Revenue page on B & O tax]
* [http://apps.leg.wa.gov/rcw/default.aspx?Cite=82.04 Chapter 82.04 of the Revised Code of Washington]
* [http://apps.leg.wa.gov/wac/default.aspx?cite=458 Title 458 of the Washington Administrative Code]


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