What are the Income Law Requirements in the State of Washington?
Income tax is a monetary charge that is levied on your income by the government. It is the income that is usually generated by businesses and individuals within a state’s jurisdiction. According to the law, it is mandatory for taxpayers such as yourself to file an income tax return annually and to determine what your tax obligations are. It is essential to know that income tax is a source of revenue for the government. The monetary gains are used by the government to fund public services, pay for government obligations, and provide goods for citizens.
In the U.S, some taxes are imposed at a separate federal, state, and local government level. Tax charges are thrust upon income, payroll, property, sales, capital gains, dividends, imports, estates, and gifts, as well as various fees. The taxes, however, fall much more heavily on labor income than on capital income.
Washington state, however, does not have a personal or corporate income tax. Citizens or businesses that engage in business in Washington are subject to market and occupation and public utility tax. The business's gross receipts are used to determine the amount of tax they are required to pay. Companies that make retail sales or provide retail services may be obligated to collect and submit retail sales tax. Washington is one of the few states that have neither a corporate income tax nor a personal income tax. It does not mean that it is not mandatory for Washington businesses to pay any significant state taxes at all. While Washington does not tax business income or personal income, the state does tax the gross receipts of most businesses through its business and occupation tax.
What is a Business and occupation (B&O) tax?
It is a gross receipts tax which is measured on the value of products, gross proceeds of the sale, or net income of the business. Business and occupation tax is calculated on the gross income from activities, which means that there are no deductions that are made from the B&O tax for labor, materials, fees, or costs of doing business.
Business and Occupation Tax rates
In the state of Washington, the tax rate varies by classification. Identifying which designation your business fits into, will help you find the frequency that corresponds to your designation.
The Business and Occupation tax is reported and paid on the excise tax return or by electronic filing. If you are a new business, you are required to register with the Department of Revenue first. Once you are logged, you are liable to receive information about filing.
Monthly returns from B&O tax are typically due on the 25th of the next month. Annual returns are due January 31st.
Small Business Credit liability
There are essential credits that are related to Business and occupation tax. If your business's B&O tax liability is lesser than a certain minimum amount, the company qualifies as a "small business," and it is eligible for the small business credit. There are two versions of the loan – the version that applies to a particular business depends on whether 50% or more of that business's taxable income is received from the categories Service and Other Activities, Gambling Contests of Chance, and Scientific R&D.
If 50% or more of your business’s taxable income comes from those categories, the credit is available if your total B&O tax liability is below:
- For monthly taxpayers, it is $141
- For quarterly taxpayers, it is $421
- For annual taxpayers, it is $1681
If your business’s taxable income is less than 50% and comes from the categories mentioned above, you are liable for the credit if your total B&O tax liability is below:
- For monthly taxpayers, it is $71 for monthly taxpayers
- $211 for quarterly taxpayers; and
- $841 for annual taxpayers.
The exact amount of credit due depends on the amount of B&O tax owing.