A new business and occupation (B&O) tax reform proposal would exempt nearly 286,000 small businesses in Washington from state B&O taxes.
The tax proposal (HB 2150) was co-sponsored by Whatcom County representative Vincent Buys. The bill is a variation on the single business tax, which was first proposed in 2010.
B&O taxes are measured by the value of products, the gross sales or income of a business, according to the department of revenue. The rate a business pays depends on its classification.
Dozens of B&O tax classifications exist under the current system. The new bill would simplify the classifications and sort them into three new rates. Service industries would pay 3.75 percent, retail and banking 1.6 percent, and telecommunications 1.2 percent. Businesses would be able to deduct up to $500,000 from gross receipts, which would exempt nearly 286,000 businesses from B&O tax obligations altogether, according to state representative Drew MacEwan.
“This is a fundamental reform of our business tax structure that simplifies our code, eliminates the tax for over 60 percent of businesses and remains revenue neutral,” MacEwan said. “This bill will accelerate job growth, grow a strong economy and make Washington a national leader and global competitor.”
Businesses grossing more than $500,000 will have a choice of three deductions each year. Companies can deduct either the cost of goods sold, the total compensation up to $200,000 per employee, or one-third of its revenue. The new proposal would leave preferential B&O rates as is for aerospace and agriculture industries.
The bill was proposed on February 19 and referred to the state finance committee.