Washington has no corporate net income tax, and no personal income tax is in effect today. Most state tax revenue comes from excise taxes, mainly the Business & Occupation (B&O) tax, retail sales tax, and use tax. The B&O tax is charged on gross receipts, not profit.
Two taxes on individuals are worth knowing. First, Washington taxes long-term capital gains under chapter 82.87 RCW, which calls it an excise tax. It applies only to individuals: 7% of taxable Washington capital gains after an annual standard deduction, plus an additional 2.9% on taxable gains over $1 million, starting with tax year 2025. Some assets, including real estate, are exempt. Second, ESSB 6346 (Chapter 238, Laws of 2026) enacts a 9.9% tax on individuals' Washington taxable income above a $1 million standard deduction. It begins January 1, 2028, and the first returns are due in 2029. Spouses and state-registered domestic partners share one $1 million deduction. See our millionaires-tax tracker for current status.
This structure makes Washington very different from most other states, and businesses operating here for the first time often find that the rules they're used to don't apply.
The B&O tax is imposed on gross receipts, not net income — meaning there is no deduction for cost of goods sold, salaries, or operating expenses. Rates vary by classification: retailing (0.471%), wholesaling (0.484%), and manufacturing (0.484%) are among the most common, while service and other activities are tiered based on prior-year taxable income (commonly 1.5%, 1.75%, or 2.1%). Many businesses have activities that fall under multiple classifications, and getting the classification right is one of the most consequential compliance decisions a business makes. Retail sales tax is imposed on the sale of tangible personal property and, as of October 2025 under ESSB 5814, a significantly expanded list of services. ESSB 6113 (2026) revised parts of that law, and ESSB 6346 (2026) schedules most of those service taxes, but not advertising, for repeal on January 1, 2029 (void if a court of final jurisdiction invalidates that bill's income tax). See our retail-services tracker. The tax is collected by the seller and remitted to DOR, with rates that vary by location across more than 300 local tax jurisdictions. Use tax is the complement to sales tax — it applies when tangible personal property or taxable services are used in Washington and sales tax was not collected at the point of sale.
Beyond the core taxes, Washington imposes a range of other excise taxes including the Real Estate Excise Tax (REET), hazardous substance tax, litter tax, tobacco and vapor products tax, and others. Each has its own rules, rates, and compliance requirements. The resources below provide a foundational overview of the entire system.
What This Resource Covers
Use this as a research map for the issue area. Verify current law and bring in a qualified professional before making high-stakes filing or planning decisions.
- B&O tax structure: gross receipts basis, classification rates, and the multiple activities tax credit (MATC)
- Retail sales tax: sourcing rules, local rate variations, and the expanded service tax base under ESSB 5814 (as amended by ESSB 6113). ESSB 6346 is scheduled to remove most of these services, but not advertising services, from the retail sale definition on Jan. 1, 2029; that change depends on the bill's new income tax surviving court review (§1202)
- Use tax: when it applies, self-assessment requirements, and common compliance gaps
- Tax classification definitions and the rules for determining which classification applies to each activity
- Digital products and SaaS taxation under Washington's digital goods framework (WAC 458-20-15503)
- Overview of additional excise taxes: REET, hazardous substance tax, and other industry-specific levies
DOR Resources
High-level overview of Washington's B&O tax
Tax classifications for common business activities
Complete list of B&O tax rates
Official definitions for each B&O classification
Overview of Washington's retail sales tax
Services that have become subject to retail sales tax
Tax rules for digital goods and products
Comprehensive introduction to all Washington taxes
Annual tax statistics publication
Overview of additional state taxes beyond B&O and sales tax
Why This Matters
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Washington's tax system is unique, and understanding its mechanics is the foundation for everything else — compliance, planning, refund identification, and audit defense. The interaction between B&O classifications, sales tax sourcing, use tax self-assessment, and the growing list of taxable services creates a system where the fundamentals genuinely matter. Getting them right from the start prevents most of the problems businesses encounter down the line.
Frequently Asked Questions
- Does Washington State have a corporate or personal income tax?
- Not today. Washington has no corporate net income tax and no personal income tax in effect today. Most state tax revenue comes from the B&O tax (on gross receipts), retail sales tax, and use tax. Two related taxes are worth knowing about. (1) Individuals may owe Washington's capital gains tax (chapter 82.87 RCW, which calls it an excise tax): 7% of taxable long-term capital gains, plus an additional 2.9% on taxable gains over $1 million, starting with tax year 2025. (2) ESSB 6346 (Chapter 238, Laws of 2026) imposes a 9.9% tax on individuals' Washington taxable income above a $1 million standard deduction, beginning January 1, 2028, with first returns due in 2029. Spouses and state-registered domestic partners share a single $1 million deduction. Initiative 645, on the November 3, 2026 ballot, would repeal the 9.9% tax. See our millionaires-tax tracker for current status.
- What is Washington B&O tax?
- The B&O tax is a gross receipts tax on business activity. It is imposed on gross income — not net profit — so there is no deduction for cost of goods sold, wages, or operating expenses. Rates vary by classification, with common rates ranging from 0.471% (retailing) up through service and other activities, which are tiered based on prior-year taxable income (commonly 1.5%, 1.75%, or 2.1%).
- What is the highest sales tax rate in Washington?
- Washington has more than 300 local sales tax jurisdictions on top of the state rate, and combined rates can exceed 10% in some localities. Rates are sourced based on where the buyer receives the goods or services — not where the seller is located — which makes local sourcing rules a critical compliance concern.
- What is Washington use tax?
- Use tax is the complement to retail sales tax. It applies when tangible personal property or taxable services are used in Washington and sales tax was not collected at the point of sale. Use tax is self-assessed by the purchaser, which is why it is frequently underreported and appears as a significant exposure area in audits.