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Out-of-state Businesses Beware: Washington B&O

Posted by Emily Taibl on Jun 11, 2018 3:29:23 PM

Washington B&O tax - Seattle CPA Firm

by Thomas Jones

If you operate a business that has transactions in Washington State (even if you don't have a physical presence in the state), you may still be liable for B&O taxes.

In a recent case, The Washington State Department of Revenue determined an out-of-state commercial bank had substantial nexus in Washington to create a business and occupation (B&O) tax requirement.  The bank did not directly have physical presence in the state, but had contracted with an affiliate to assist with performing site visits at merchant locations for credit cards.  The relevant rule is that nexus is created when a “taxpayer is engaged in activities in the state, either directly or through a representative, for the purpose of performing a business activity.”

While most businesses working with customers across state lines think of possible sales tax and income tax requirements, Washington B&O is sometimes missed since it is a gross income tax, and even businesses without physical presence can be subject to B&O.  Washington RCW 82.04.067 states a substantial nexus is created in Washington if “a nonresident individual or a business entity that is organized or commercially domiciled outside this state, and the person had:

  1. More than $53,000 of property in this state;
  2. More than $53,000 of payroll in this state;
  3. More than $267,000 of receipts from this state; or
  4. At least 25% of the person’s total property, total payroll, or total receipts in this state.”

Questions on whether your business has a B&O tax requirement?  Contact Thomas Jones at tjones@sweeneyconrad.com or 425.629.1990.

Topics: Tax

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