What taxes apply to a new small business?

Taxes Applicable to New Small Businesses in Washington State

Starting a small business in Washington involves understanding and managing several tax obligations. Proper tax planning supports compliance and smooth operations from day one.

Key Taxes for Washington Small Businesses

• Business & Occupation (B&O) Tax: Washington does not have a corporate or personal income tax, but it imposes a B&O tax on gross receipts. This tax applies to most businesses and varies by industry classification. It is important to register with the Washington Department of Revenue and file returns regularly.
• Sales and Use Tax: If your business sells tangible personal property or certain services, you must collect sales tax from customers. The state sales tax rate is combined with local rates, so rates vary by location. Use tax applies to purchases made without sales tax that are used in the business.
• Employment Taxes: If you hire employees, you must manage payroll taxes including federal income tax withholding, Social Security, Medicare, and Washington’s Unemployment Insurance (UI) tax. Register with the Washington Employment Security Department for UI tax reporting.
• Excise Taxes: Certain industries such as alcohol, tobacco, and fuel are subject to additional excise taxes. Verify if your business activities require these taxes.

Operational Considerations

• Registration: Register your business with the Washington Department of Revenue to obtain a Unified Business Identifier (UBI) number. This number is essential for tax filings and licensing.
• Recordkeeping: Maintain accurate sales records, payroll documents, and expense receipts. Good bookkeeping supports tax reporting and compliance.
• Filing Frequency: Depending on your business size and tax type, you may file monthly, quarterly, or annually. Automate reminders or use tax software to avoid late filings.
• Tax Credits and Incentives: Explore available state tax credits or incentives for small businesses, such as those related to hiring or investing in certain areas.

As of 2026, staying updated with the Washington Department of Revenue’s guidelines ensures your business complies with tax requirements efficiently and avoids penalties.