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.
Washington Deductions & 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)
The Part Washington Does Not Do For You
Washington skipping the income tax does not get you out of federal self-employment tax, and that lands on your net profit — what you earned minus what you can prove you spent. The proving is on you, and it is where most of the money leaks out.
TaxTidy is where the proof lives. Photograph a receipt and it reads the vendor, the amount and the date in about three seconds, then files the expense on its Schedule C line. Nothing gets typed in twice, and nothing depends on you remembering a purchase from eight months ago.
Because Washington wants its filings on its own schedule, the same organized record does double duty — one set of receipts, sorted once, ready for whichever deadline comes first. Your Audit Readiness Score shows you how solid that record is before anyone else asks.
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.
Start Tracking Your Washington Business Expenses
Your first 25 scans are on us — free for life, no card required. Enough to sort this quarter's receipts by Schedule C line and see your Audit Readiness Score for the first time.
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