Key figures
Washington accounting
2026, with sources
A gross receipts tax instead of an income tax
Washington has no corporate income tax. Instead, the Department of Revenue levies the business and occupation (B&O) tax on gross receipts: the rate depends on the activity, and there are no deductions for the costs of earning the income. Profit or loss doesn’t matter; revenue does. There is no federal conformity question, no Section 174 add-back and no NOL to carry forward, because none of those concepts exist in the base.
For the books, that changes where the tax lands. B&O is an operating expense, accrued each month on the revenue reported in that month, and it sits outside ASC 740. A Delaware C-corp selling into Washington still files federal Form 1120 and its other states’ income tax returns; Washington adds a monthly or quarterly excise return, not an annual income return.
Which classification, which rate
Each line of revenue is classified. Retail sales, which since October 1, 2025 include SaaS, IT services and custom software, are Retailing at 0.471%. Wholesale sales are 0.484%. Income from services that are not retail sales is Service and Other Activities, which since ESHB 2081 has three rates set by the company’s (or its affiliated group’s) prior-year income in that classification: 1.5% below $1 million, 1.75% from $1 million to $4,999,999.99, and 2.1% from $5 million.
Example: a 10-person startup with $3 million of revenue, $800,000 of it from Washington customers on SaaS subscriptions and $200,000 from Washington implementation projects. The subscriptions are Retailing (0.471% B&O plus sales tax collected from the customer). If the implementation work is now a taxable IT service it is Retailing too; if not, it is Service and Other Activities at 1.5%, because last year’s income in that class was under $1 million.
Nexus without an office
An out-of-state company owes B&O tax, and must register, once it has more than $100,000 of gross receipts sourced to Washington in the current or prior calendar year, counting all classifications, not only retail sales. A single employee working from Washington is physical presence regardless of revenue. Large cities, including Seattle, Bellevue and Tacoma, levy their own B&O taxes on top of the state’s, with their own thresholds and returns.
Deadlines
- Monthly (25th of the next month), quarterly or annually, as assignedB&O tax plus sales tax collected, on the frequency DOR assignsCombined Excise Tax Return
The federal baseline
This page covers what Washington adds. The federal rules underneath it apply here too.
Common questions
Is the B&O tax an income tax for our provision?
No. B&O is a tax on gross receipts, with no deduction for payroll, rent or cost of goods. A company that loses money still owes it on every dollar of Washington revenue above the small business credit. It belongs in operating expenses as a tax other than income tax, not in the income tax provision.
Which B&O rate applies to a software company?
It depends on what you sell. A SaaS subscription sold to a Washington customer is a retail sale (a digital automated service), so it is reported under Retailing at 0.471% and you collect sales tax. Consulting, implementation that isn’t taxable IT work, and most other services are Service and Other Activities at 1.5% to 2.1% depending on last year’s income.
Accounting next door
- IDIdaho accountingIdaho taxes corporations at a flat 5.3% with a $20 minimum, apportions by a single sales factor, and conforms to the Internal Revenue Code as of January 1, 2026, except bonus depreciation.
- OROregon accountingOregon taxes corporations twice: a 6.6%/7.6% excise tax on income with a sales-based minimum, and a 0.57% Corporate Activity Tax on Oregon receipts over $1 million.
Founder guides on this
- US GAAPUS GAAP for early-stage startups, in plain EnglishAccrual accounting, revenue recognition (ASC 606), leases (ASC 842), stock compensation and capitalized software: what each means for a small company.
- Sales taxSales tax nexus for startups: when you owe tax in a stateSince Wayfair, selling into a state can create a sales tax obligation. How economic nexus works, why SaaS is taxable in some states and when to register.
- The closeWhy startups should close their books every monthA monthly close turns a bank balance into numbers an investor, an auditor or a 409A firm will accept. What it is, and why it gets expensive to skip.
More of the Washington guide
- ReceivablesReceivables and sales tax in WashingtonSales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayablesPayables and contractors in WashingtonPaying vendors and contractors: 1099 filing, use tax, contractor tests and withholding
- PayrollPayroll taxes and employer rules in WashingtonWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceCompliance and filings in WashingtonRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in WashingtonCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.