Washington Small Business Tax Guide — 2026
Income Tax Rate
No state income tax (7% capital gains tax on gains over $270,000)
Sales Tax Rate
6.5% state + local (total typically 8% — 10.5%)
Filing Deadline
No state income tax return required for earned income
Washington Income Tax
Washington does not impose a state income tax. This means self-employed individuals only pay federal income tax and federal self-employment tax (15.3%) on their business earnings — no state income tax return is required.
Self-Employment in Washington
Washington has no state income tax on earned income. A 7% capital gains tax applies to gains over $270,000. Self-employed individuals pay the Business & Occupation (B&O) Tax on gross receipts.
Estimated Tax Requirements
No state income tax estimated payments. B&O Tax is filed monthly, quarterly, or annually based on volume. Federal estimated payments still apply.
WashingtonDeductions & Credits
- No state income tax on earned income
- B&O Tax is based on gross receipts (not profit) — no deductions allowed
- Small business B&O tax credit for businesses with less than $125,000 in gross receipts
- Capital gains tax applies to gains over $270,000 (excludes real estate)
Business Filing Fees
LLC: $200 formation + $71 annual report. Corporation: $180 formation + $71 annual report.
Key Facts About Washington Taxes
- Washington has no income tax on earned income but charges 7% on capital gains over $270K
- The B&O Tax is a gross receipts tax — you pay it even if your business isn't profitable
- B&O rates vary by industry: 1.5% service, 0.471% retail, 0.484% manufacturing
- Seattle has its own additional B&O tax for certain businesses
- High combined sales tax rates (up to 10.5% in some areas)
Track Your Washington Business Expenses
TaxTidy helps Washington freelancers and self-employed individuals track every business expense with AI-powered receipt scanning. Snap a photo of any receipt and TaxTidy instantly extracts the vendor, amount, and tax category — then maps it to the correct IRS Schedule C line. At tax time, generate an audit-ready PDF report with all your deductions organized and totaled.
Frequently Asked Questions
Does Washington have taxes for self-employed people?
Washington has no income tax on earned income. However, the Business & Occupation (B&O) Tax applies to gross receipts (not profit). Service businesses pay 1.5% of gross receipts. A small business credit offsets B&O for businesses under $125K in revenue.
What is Washington's B&O Tax?
The B&O Tax is a gross receipts tax — you pay it on total revenue, not net profit. Rates vary by business type: 1.5% for services, 0.471% for retail. There are no deductions for business expenses.
Does Washington tax capital gains?
Yes. Washington imposes a 7% tax on long-term capital gains over $270,000 (excluding real estate). This does not apply to ordinary self-employment income.
Official source: Washington Department of Revenue
TaxTidy provides expense organization tools based on the most current US tax law available to it. TaxTidy is not a CPA, Enrolled Agent, or licensed tax professional. All categorizations, deductions, and tax calculations are estimates. Please verify all data for accuracy and consult a certified tax professional before filing.
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