WA Service & Other B&O Rates: 1.5%, 1.75%, 2.1%

Sources checked Oct. 17, 2026. Washington Tax Desk is independent of the Washington Department of Revenue (DOR) and is not a CPA or law firm.

Quick answer

Since Oct. 1, 2025, Washington's Service and Other Activities B&O classification has three rates: 1.5%, 1.75% and 2.1%. Under RCW 82.04.290(2)(a), the rate depends on your gross income subject to this classification "for the immediately preceding calendar year," combined with affiliated persons. DOR: "If you (or your affiliated group) had taxable income subject to the Service and Other Activities B&O tax classification in the prior calendar year, use the table below." B&O is a gross receipts tax, with no deduction for labor, materials or other costs (RCW 82.04.080; DOR).

Rate table (DOR special notice, July 25, 2025)

Prior-calendar-year taxable income in this classification (you or your affiliated group)	Rate
Less than $1 million	1.5%
$1 million to $4,999,999.99	1.75%
$5 million or more	2.1%

DOR: "Effective October 1, 2025, the business and occupation (B&O) tax has three tax rates under the Service and Other Activities classification." The 2.1% rate was added by ESHB 2081 §109 (ch. 420, Laws of 2025), which took effect Oct. 1, 2025.

What the statute says

RCW 82.04.290(2)(a)(i): "1.75 percent for any person whose gross income of the business subject to the tax imposed under this subsection (2), for the immediately preceding calendar year, was equal to or greater than $1,000,000 and less than $5,000,000 unless: (A) The person is affiliated with one or more other persons; and (B) the aggregate gross income ... for all affiliated persons was greater than or equal to $5,000,000 for the immediately preceding calendar year."

RCW 82.04.290(2)(a)(ii)(B) applies 1.5% where prior-year gross income "was less than $1,000,000," unless the affiliated group's aggregate was $1,000,000 or more. Hospitals and persons subject to the RCW 82.04.299 surcharge also pay 1.5% ((2)(a)(ii)(A), (C)). Everyone else pays "(iii) 2.1 percent."

Affiliated means a person that "directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with another person"; control means more than 80% of the power to direct management and policies (RCW 82.04.290(2)(f); DOR notice).

Exceptions

DOR's notice says the table "does not apply to" hospitals and select advanced computing businesses, which "continue to pay the 1.5% rate." Select advanced computing businesses also owe the workforce education investment surcharge, 7.5% of this income since Jan. 1, 2026, with the surcharge capped at $75 million a year per affiliated group (RCW 82.04.299). DOR's Workforce Education page also lists real estate brokers; since 2025, DOR has real estate commissions reported under a separate Real Estate Commissions classification, and DOR says brokers' other Service and Other Activities income is subject to the higher rates.

Separately, since Jan. 1, 2026, a 0.5% surcharge applies to Washington taxable income over $250 million, with exclusions, through Dec. 31, 2029 (RCW 82.04.288).

Worked examples (illustrative only)

Made-up round numbers, for arithmetic only. They assume all income is taxable in this classification in Washington.

Under $1M. A bookkeeping business had $600,000 in prior-year taxable service income and no affiliates. Rate this year: 1.5%. On $50,000 of this quarter's service income, B&O is $750.
Affiliates push it over $1M. Company A had $800,000 and its affiliate had $400,000 last year ($1.2M combined). Under DOR's Workforce Education Example 3, both use 1.75% this year. The statute's text doesn't expressly address a member under $1M in a $1M–$5M group: (2)(a)(i) keys on the person's own income, so check DOR's example. On $100,000, B&O is $1,750.
$5M+. A firm had $6 million in prior-year taxable service income. Rate this year: 2.1%. On $1,000,000 for a quarter, B&O is $21,000.

DOR's Workforce Education Example 2 says a business over $1 million in 2025 "must report ... at the 1.75% B&O tax rate for the entire 2026 calendar year," so the tier is set by the prior year, not by income during the current year.

Small Business B&O Tax Credit

DOR's credits page lists a Small Business B&O Tax Credit: "Businesses below a certain B&O tax liability are entitled to a credit," which varies with total B&O tax due and filing frequency. Check DOR's current tables; this page does not restate the amounts.

Uncertainties (flagged)

Affiliate member under $1M in a $1M–$5M group: DOR's Workforce Education Example 3 applies 1.75%; the statute's text doesn't expressly address this case. Check DOR's example.
First-year or new businesses: the statute keys on prior-year gross income being "less than $1,000,000"; DOR's notice and Workforce Education page do not specifically address a business with no prior Washington year. Confirm with DOR before relying on this.
Mid-year affiliate changes and incomplete prior-year data: RCW 82.04.290(2)(e) requires correcting current-year reporting when complete prior-year information becomes available for taxpayers under the reconciliation rules of RCW 82.04.462(4). Other situations depend on the facts.
DOR's special notice cites the bill as "ESSB 2081 Chapter 240, Laws of 2025, Sec 109"; the enrolled session law is ESHB 2081, ch. 420, Laws of 2025, §109. We cite the session law.

FAQ

What is Washington's B&O rate for service businesses? Since Oct. 1, 2025: 1.5% (under $1M prior-year taxable income), 1.75% ($1M to $4,999,999.99) or 2.1% ($5M or more), counting affiliated groups (DOR notice; RCW 82.04.290).

Is the tier based on this year's income? No. It uses the immediately preceding calendar year (RCW 82.04.290(2)(a)).

Do affiliated companies combine income? Yes. Under the statute and DOR's notice, an affiliated group's aggregate income in this classification determines the tier.

Who stays at 1.5% regardless of income? Per DOR, hospitals and select advanced computing businesses for their Service and Other Activities income, though select advanced computing businesses also owe the RCW 82.04.299 surcharge.

Sources

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General information, not individualized tax advice. Results depend on the facts and applicable law. Washington Tax Desk is independent of Washington DOR.

Washington Service & Other Activities B&O tax rates (1.5%, 1.75%, 2.1%)