Key figures
Washington advisory
2026, with sources
No income tax, but not no tax
Washington’s pitch is the absence of an income tax on wages, and for a company that is true through 2027. What replaces it falls on revenue and on purchases: B&O on gross receipts, sales tax on a widening list of services, and payroll premiums for paid leave and long-term care. A model that treats Washington as tax-free understates both cost of revenue and payroll burden.
For founders personally, the picture is changing. The capital gains tax (7%, and 9.9% on gains over $1 million) has applied since 2022, and SB 6346 adds a 9.9% tax on adjusted gross income over $1 million from 2028, subject to the November 2026 repeal vote. Both are individual taxes, but both matter to liquidity planning for Washington-resident founders and early employees.
Incentives
Because there is no corporate income tax, Washington’s incentives are B&O credits, deferrals and exemptions aimed at specific industries, listed on DOR’s tax incentives pages. There is no general research credit for a software startup. The broadly available relief is the small business B&O credit, which phases out as B&O liability rises and was increased by ESSB 6346.
2025 and 2026 changes to watch
Washington changed more business tax law in 2025 and 2026 than in the decade before. DOR’s 2026 legislation summary notes that ESSB 6346 also modifies the definition of a retail sale; check DOR’s special notices for which 2025 service categories stay taxable and when.
- Oct 1, 2025: IT services, custom software, website development, advertising, temporary staffing and more became retail sales (ESSB 5814).
- Oct 1, 2025: Service and Other Activities B&O moved to 1.5% / 1.75% / 2.1% tiers (ESHB 2081).
- Jan 1, 2026: Paid Family & Medical Leave premium rose to 1.13%.
- Nov 3, 2026: voters decide Initiative 645, which would repeal the SB 6346 income tax.
- Jan 1, 2027: minimum wage $17.73; UI taxable wage base $82,000.
- Jan 1, 2028: 9.9% income tax on AGI over $1 million (SB 6346), unless repealed.
The federal baseline
This page covers what Washington adds. The federal rules underneath it apply here too.
Common questions
Does Washington really have no income tax?
Not on wages, through 2027. From January 1, 2028, SB 6346 imposes a 9.9% tax on individuals and married couples with annual adjusted gross income over $1 million, first due in April 2029, unless voters repeal it: Initiative 645, which would do that, is on the November 3, 2026 ballot. Separately, Washington already taxes individuals’ long-term capital gains at 7%, and 9.9% on gains above $1 million, above an annual standard deduction.
Does Washington’s capital gains tax reach a startup exit?
It can. The capital gains tax applies to individuals’ long-term gains from selling stock, including founder shares, above the standard deduction. How a gain excluded federally under Section 1202 is treated is a question for DOR’s capital gains guidance and the founder’s own preparer; it should be checked before a sale, not after.
Where do founders get Washington wrong?
Receipts, not profit. Founders coming from income tax states expect a loss year to be tax-free; in Washington a pre-profit company with $500,000 of Washington SaaS revenue still owes Retailing B&O and must collect sales tax on it.
Advisory next door
- IDIdaho advisoryIdaho follows federal law closely, including QSBS; its 5% research credit is nonrefundable and, since 2026, can’t be claimed on costs also deducted under §174A.
- OROregon advisoryOregon disconnects from the federal QSBS exclusion and bonus depreciation from 2026, offers no general R&D credit, and adds a $1,000-per-job credit for 2026–2031.
Founder guides on this
- 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.
- EquityStock options, 409A valuations and vesting for startupsHow option strike prices are set by a 409A valuation, how vesting and the cliff work, and why ASC 718 makes every grant an expense on your P&L.
- RunwayBurn rate and runway: how to calculate them correctlyGross burn, net burn and months of runway, done the way an investor checks them: from cash, averaged, and with the hires you’ve already committed to.
More of the Washington guide
- AccountingAccounting and state tax in WashingtonCorporate tax, conformity to federal rules, apportionment and what it does to your books
- 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
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.