Business and occupation (B&O) taxes are levied at a percentage rate on the gross receipts of the business, less some deductions. Businesses are put in different classes such as manufacturing, wholesaling, retailing, and services. Within each class, the rate must be the same, but it may differ among classes.
Effective April 20, 1982, the legislature set the maximum tax rate that can be imposed by a city's legislative body at 0.2percent (0.002), but grandfathered in any higher rates that existed on January 1, 1982. RCW 35.21.710. All ordinances that impose this tax for the first time or raise rates must provide for a referendum procedure RCW 35.21.706. Any city may levy a rate higher than 0.2 percent, if it is approved by a majority of the voters. RCW 35.21.711. Currently, 40 of Washington's 281 cities levy this tax.
In 2003, the legislature passed a bill that required the Association of Washington Cities (AWC) to convene a committee to develop a model ordinance that must be adopted by all cities imposing a B&O tax. The legislature was concerned about the lack of uniformity of the cities' B&O tax ordinances and about allegations that some business income was subject to multiple taxation. Beginning January 1, 2008, cities that levy the B&O tax must allow for allocation and apportionment, as set out in RCW 35.102.130.
- RCW 35.21.706: Referendum procedure. An ordinance that imposes the tax or increases the tax rate must include a provision for a referendum procedure.
- RCW 35.21.710: Maximum B&O tax rates established.
- RCW 35.21.711: Voter approval for higher rates.
- RCW 35.22.280(32): Authority for first class cities to levy a B&O tax.
- RCW 35.23440(8): Authority for second class cities to levy a B&O tax.
- RCW 35.27.370(9): Authority for towns to levy a B&O tax.
- RCW 35A.82.020: Authority for code cities to levy a B&O tax.
- Ch.35.102 RCW: Municipal business and occupation tax.
Model B & O Tax Documents
2012 B&O Tax Model Ordinance (from the Association of Washington Cities website)
B & O Tax Rates
B & O Tax Studies
Cities with B&O Tax Code Deviations from Core Model Ordinance
RCW 35.102.040(4) provides: Any city that adopts an ordinance that deviates from the nonmandatory provisions of the model ordinance shall make a description of such differences available to the public, in written and electronic form.
Tax Sharing Agreement
The City of Seattle is currently the host of a tax sharing agreement that allows participating cities to share tax data. The purpose of the tax sharing agreement is to provide Washington cities the opportunity to share tax information with each other without breaching the tax confidentiality provision of the municipal tax ordinances. Any city that obtains tax information from another city is responsible for maintaining the confidentiality and security of that information in accordance with the agreement.
- Agreement for Sharing Taxpayer Information between Cities
City of Seattle
Joseph A. Cunha, City Tax Administrator
Department of Finance and Administrative Services
License and Tax Administration
700 5th Ave., Suite 4250
P.O. Box 34214
Seattle, WA 98124
Tel: (206) 233-7820
Fax: (206) 684-5170
Email: Joseph Cunha
- Participating Washington Cities (agreement requires participating cities to maintain a copy of this agreement with all amendments at MRSC)
- Lake Forest Park
- North Bend
Voluntary Disclosure Programs
Multiple cities within the State of Washington have a Voluntary Disclosure Program which encourages unregistered businesses to comply with that city’s tax laws and to voluntarily register and pay prior obligations. If your business has established nexus in any of the cities listed on this page (below), and you are required to report taxes according to that city’s tax code, the contacts listed below can assist you in becoming compliant with their respective city.
Businesses can come forward through the Voluntary Disclosure Program offered by first contacting the respective city representative listed below. The representative may request an application, and if so, will provide one to you. Generally, under a city’s Voluntary Disclosure Program the “look back” period is generally limited to four years plus the current year. Penalties will be waived and interest will be imposed at the statutory rate. You will be required to complete a business license application and pay applicable license fees.
If you believe you may have nexus with one of the cities below or you have specific questions about that city’s voluntary disclosure program, please contact the representative listed for that city.
Benefits of Voluntary Disclosure
If your business is discovered through a city’s own efforts (e.g. enforcement, investigation, audit), you may be liable for tax, interest, penalties of 39 percent of the tax due, and a “look back” period of 10 years plus the current year.
A city’s Voluntary Disclosure Program can offer you the following benefits:
- The “look back” period for your tax liability is limited to the prior four years plus the current year.
- Up to 39 percent in potential penalties can be waived, which include:
- 5 percent assessment penalty for substantially underpaid tax;
- 5 percent unregistered penalty; and
- 29 percent late payment of a return penalty.
- The city can summarize your unreported tax liability in a single tax assessment.
Full statutory interest will still be imposed on all amounts due.
Who is Eligible for the Program
In general, to qualify for full voluntary disclosure benefits a business must have:
- Not been contacted by the respective city to determine if the business should have been registered or regarding specific outstanding obligations.
- Not engaged in evasion or misrepresentation in reporting tax liabilities.
Currently Registered Businesses
You may not know if your business has been previously registered with a city for business license and tax purposes. Before submitting a voluntary disclosure application we recommend that you contact the city representative for the city you are interested in registering under a voluntary disclosure program (see list above).
If a business that is currently registered discovers that it has underreported its tax obligations, it should amend its returns and submit any additional tax and interest due with the respective city.
If a city’s records indicate your business was previously contacted in an effort to determine our registration and reporting requirements, or regarding other enforcement issues, you will not qualify for the Voluntary Disclosure Program.
Third Party Representation
If you would like a city to work with a third party representative, you will be required to provide that city a completed Confidential Tax Information Authorization (CTIA) at the time of disclosure in order for the Department to correspond with them regarding your confidential taxpayer information. A confidential tax information authorization form is available upon request from the applicable city representative.
General Application Process*
Generally, a person will be required to submit the following items to begin the Voluntary Disclosure Process:
- Letter and or application requesting Voluntary Disclosure (including an explanation of the business activities);
- Schedules (by year) showing gross income generated in the respective city along with any deductions; and,
- A Confidential Taxpayer Information Authorization form if a third party will be representing the business.
Once your tax liability has been determined the city will prepare a tax assessment with interest. You will be sent a draft copy of the assessment for review. The assessment will then be submitted for processing and you will receive a billing notice. Full payment must be received according to the payment instructions on your billing notice. Additional interest and late payment penalties will accrue if the billing notice is not paid in full by the due date.
* Please note that some cities will have some variation in their process in how figures will be provided to them. For example, after a business has requested to enter a voluntary disclosure program, the city representative may simply provide the business with tax forms to complete and request the returns be completed and submitted to the city along with payment.
Application Not Approved
In the event that your application was not approved, you will receive an explanation from the applicable city along with further instructions.
Need more Information?
If you would like more information about our Voluntary Disclosure Program, please contact the respective city representative found in the list below. In the event you are engaging in business in a city not listed below, you will need to contact that city for more information. Here is a list of other municipalities in Washington that have a B&O tax.
City Representative Contact for Voluntary Disclosure Program
||General VDA Program
||PO Box 90012 Bellevue
||Business License Department
||Attn: Finance Department BLS
210 Lottie Street
Bellingham, WA 98225
||Attn: Jeanette Wischhoefer
345 6th St, Ste 600
Bremerton, WA 98337
||400 SW 152nd Street Suite 300
Burien, WA 98166
||2930 Wetmore Ave
Everett, WA 98201
PO Box 1307
Issaquah, WA 98027
||220 Fourth Avenue South
Kent, WA 98032
|Lake Forest Park
||(206) 368-5440 x132
||Attn: Business Tax and License
17425 Ballinger Way NE
Lake Forest Park, WA 98155
||Attn: City Clerk-Treasurer
P.O. Box 700
Roy, WA 98580
||700 5th Avenue, Ste 4250
P.O. Box 34214
Seattle, WA 98124-4214
||733 Market Street, Room 21
Tacoma, WA 98402-3773
||Attn: Michelle Cournyer
P O Box 505
Westport, WA 98595