Washington small business taxes

Pay Your Washington Small Business Taxes

Most small businesses are required to pay state taxes. Learn about your Washington business taxes and how we can help you stay compliant.

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For Washington small business owners, taxes can be a never-ending source of anxiety. Some years, you may find yourself asking what Washington business tax rate you need to pay. Other times, you might find yourself concerned about filing your returns on time, or whether you need to file a return at all. Whatever your situation (or level of anxiety), filing and paying Washington small business taxes is an important part of keeping your business legally compliant. 

However, Washington small business taxes can be confusing. Even experienced business owners sometimes find tax laws and regulations difficult to decipher. The biggest challenge business owners face is that Washington business tax rates can change depending on how much money you make or what kind of business entity you operate. We’ve put together this short guide on how to file small business taxes in Washington for business owners like you.

If you’re looking for more help with compliance, our Worry-Free Compliance Service can help you stay in good standing with the state by keeping track of your business’s required filing due dates. It will also send reminders when deadlines are approaching. 

If you’re looking for information about federal taxes, head over to our page on federal taxes for small businesses.

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Step 1: Establish your Washington business’s corporate income tax obligations.

The Washington business tax rate your company pays will typically depend upon the type of business entity you operate. For example, tax rates usually differ if your business is a corporation or a sole proprietorship. Most states have a separate income tax rate especially for corporations. However, in some states, if you operate your business as a limited liability company (LLC), partnership, S corporation, or sole proprietorship, these are all considered pass-through entities and are usually taxed at the state’s personal income tax rate.

Washington has no corporate income tax or personal income tax. This means that whatever Washington small business taxes that you pay won’t include taxes on your income generated in Washington State. You may, however, still be liable for other types of taxes.

Even if your Washington company doesn’t make any money, you may still have to file a “No Business Return.” This document shows that you’re an active Washington company but you didn’t make any money in Washington during the taxable time period. Even though there’s no income tax in Washington State, you’ll have to file a No Business Return to show you don’t owe certain other types of taxes. 

Step 2: Determine your Washington business’s employment taxes

If you have employees, you may also have to consider employment taxes as part of your business taxes in Washington. While you won’t have to withhold income taxes from employees’ paychecks, you’ll still have to pay unemployment insurance taxes. Unemployment taxes will vary because they are calculated based on your individual employees’ wage rates. The Employment Security Department of Washington State has helpful information that can guide you through any immediate questions when paying unemployment taxes.

Step 3: Establish your Washington business’s additional state tax obligations

There are a number of other state taxes that might apply to your business as well. 

Gross receipts tax

Washington doesn’t have an income tax. It does, however, have something called a “business & occupation tax.” Your Washington small business taxes will therefore depend upon the gross receipts of your business, not your annual income. Your Washington business tax rate is calculated by the type of business that you do, not your level of income or your entity type. For instance, it doesn’t matter whether your hair salon was formed as a corporation or a partnership, your business and occupation tax rate will be the same. 

You can find a list of business & occupation tax rates on the Washington Department of Revenue website. Be sure to check the list carefully so you know what to expect. You’ll also be able to find a list of tax classifications by industry so you can further clarify what your Washington business tax rate may be. You can file and pay your business & occupation returns and taxes online. Check with the Washington Department of Revenue to answer any questions about your tax classification or your business & occupation tax rate. 

Sales tax

Washington currently charges a 6.5% sales tax, which business owners must pass through to the state. This is a tax on goods and services sold in Washington State. Because there’s no income tax in Washington, retail sales tax is the state’s primary source of raising revenue. However, because Washington is a very business-friendly state, there are some key sales tax exemptions. These include, among other things, exemptions for food, prescription drugs, and sales to and on tribal land. If you have questions about whether your product or service is covered under sales tax laws and regulations, be sure to contact the Washington Department of Revenue. Your Washington small business taxes may differ drastically depending upon sales tax exemptions.

Step 4: Prepare to file and pay your Washington small business taxes

In addition to being business friendly from a financial cost perspective, Washington’s tax technology makes it easy for small businesses to file their returns. You can easily access Washington’s online filing portal to file your returns, your No Business Returns, and pay your Washington small business taxes.

However, before you finalize your return, it’s helpful to have all your relevant tax information in order. Some records you may need to file your business taxes in Washington include:

  • Social security number
  • Address 
  • Business address and governing documents
  • Your business’s employer identification number (EIN) and any state tax ID
  • Any invoices and sales records from the last year
  • Your personal and business expense records (if you operate a pass-through entity)
  • Any relevant receipts

This means that tracking your business’s income and expenses is essential. Since our business is helping keep your business compliant, our ZenBusiness Money app might be a great choice for a small business owner. Our app can help you keep track of invoices and manage your business finances. Having everything in one place is usually very convenient at tax time!\

Do I need an accountant?

You’re a professional dog walker or landscaper or stylist. You’re not a bookkeeper! And nor should you be. The truth is that most small businesses do need professional accounting help. Nearly all successful small businesses hire an accountant to help get their books in order and taxes done correctly. There may be serious consequences for those who don’t file their Washington small business taxes or who file them incorrectly. Don’t put yourself in that position. The Internal Revenue Service (IRS) has a guide to understanding tax preparer qualifications. If you’re stumped on how to find a qualified tax preparer, the IRS’s guide can be very helpful.

Not sure how to stay compliant? Learn more about legal compliance for small business owners.

How we can help

Our business is helping other businesses grow and succeed. We’ve been passionate about helping business owners like you navigate your many state obligations — from filings to taxes — for years.

And for help tracking finances, our ZenBusiness Money App allows you to easily send custom invoices, accept credit card and bank transfer payments, and manage your clients from an easy-to-use dashboard. The app helps keep everything in place for reporting and tax time too. No matter what size your business is, we’ve got the tools you need to keep it running smoothly. 

If your business is still in the formation phase, our Washington LLC Formation Services or Corporation Formation Services can help you get started.

Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

FAQs

  • How much can a Washington small business make before paying taxes?

    An experienced tax preparer or accountant can give you advice on how to best structure your business to make it most tax-efficient. Regardless of how much money you make, Washington State still requires you to file a No Business Return, even if you aren’t required to pay any tax.

  • What percentage does a Washington small business pay in taxes?

    Washington doesn’t have an income tax or a corporate tax. The amount of tax you pay depends upon your type of business and your business’s gross receipts. For example, corporations pay a flat tax. However, pass-through entities pay taxes based on your personal income. The percentage paid will also depend upon your level of business income. Be sure to check how your type of business or industry is classified for business and occupation tax purposes.

  • How does a Washington small business pay taxes?

    You can pay your Washington small business taxes through the Washington Department of Revenue’s online portal. Paying unemployment insurance tax and local sales tax may require you to pay through different payment systems. Make sure to confirm with local tax commissioners and the Washington Employment Security Department before submitting payments.

  • Do I have to file taxes for my small business in Washington?

    You’ll likely have to file Washington small business taxes. While you may not have to file income tax, there are many more types of taxes. Nearly all businesses have to file some form of gross receipts tax. Because sales tax is charged on both goods and services, you may also have to pay sales tax.

Small Business Tax Information by State

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