Washington's business registration requirements center around a unique tax framework that sets it apart from most states.
Unlike traditional corporate income tax structures, Washington imposes a gross receipts tax called the Business & Occupation (B&O) tax alongside comprehensive sales tax obligations.
Since 2020, Washington has applied a unified $100,000 economic nexus threshold to both taxes, meaning remote businesses exceeding this threshold must register for and remit both B&O and sales tax.
Washington requires businesses to register for sales tax when they meet economic nexus thresholds or establish physical presence in the state.
Washington's economic nexus threshold requires registration when gross income from Washington customers exceeds $100,000 in either the current or prior calendar year. This threshold calculation includes all sales types: taxable sales, exempt transactions, wholesale sales, and marketplace-facilitated transactions.
The $100,000 threshold applies regardless of transaction volume, meaning a single large contract can establish nexus just as easily as thousands of small sales.
When you cross the threshold, collection obligations begin on the first day of the month that starts at least 30 days after exceeding the limit.
Physical activities that create immediate sales tax nexus include:
Washington requires registration through the Department of Revenue's My DOR Portal before beginning tax collection. The state assigns filing frequency (monthly, quarterly, or annually) based on business size and tax volume.
Monthly returns are due by the 25th of the following month, while quarterly returns are generally due by the last day of the month after the reporting period, and annual returns have a specific due date.
Washington does not impose a traditional corporate income tax. Instead, the state levies a Business & Occupation (B&O) tax on gross receipts, creating a fundamentally different compliance framework than income-based systems in other states.
Washington's substantial nexus standard for B&O tax applies when businesses meet any of these thresholds during the current or prior calendar year:
The 25% rule captures smaller businesses whose Washington activity represents significant portions of their total operations, even when absolute dollar amounts fall below other thresholds.
B&O tax operates on gross receipts without deductions for expenses or cost of goods sold. Starting October 1, 2025, Washington now implements progressive B&O rates for service businesses: 1.5% for companies with less than $1 million in affiliated group gross income, 1.75% for $1 million to $5 million, and 2.1% for amounts exceeding $5 million.
Registration occurs through the My DOR Portal, with filing frequency determined by tax volume. Most businesses file monthly or quarterly returns, with payments due by the last day of the month following the reporting period.
Employment tax nexus in Washington is generally triggered when an employee performs work from a Washington location, but for certain taxes, such as the business and occupation (B&O) tax, nexus may only arise once specific payroll or economic thresholds are met.
Employment nexus applies to:
The location where work is performed determines nexus, not the employee's residence or the company's domicile.
Employment nexus requires multiple registrations:
Registration must occur before paying the first Washington employee to avoid penalties and interest.
Washington's recent legislative changes significantly expand tax obligations for digital businesses and professional service providers, creating new compliance requirements for previously exempt activities.
Washington imposes sales tax on expanded categories of digital and professional services, including: information technology and custom software development, website development and digital marketing services, live presentations, webinars, and online training.
Some professional consulting and advisory services may also be affected if they are directly related to these categories.
Marketplace facilitators must collect and remit both sales tax and B&O tax on behalf of third-party sellers when Washington sales exceed $100,000. However, marketplace sales still count toward individual sellers' economic nexus calculations for direct sales outside the platform.
Affiliate marketing relationships, drop-shipping arrangements, and third-party connections do not automatically create a physical presence nexus in Washington.
Establishing tax or employment nexus in Washington often requires foreign registration with the Secretary of State as a foreign business entity.
While tax registration and foreign entity qualification are separate processes, crossing economic nexus thresholds typically demonstrates sufficient business activity to require corporate registration.
Washington's registration requirements vary by tax type:
The state's Unified Business Identifier (UBI) system coordinates registrations across multiple agencies, simplifying the administrative process compared to states with separate agency requirements.
Records must generally be retained for five years from the due date of returns for tax purposes in Washington, with electronic storage acceptable for most documentation types. Employment tax records should be kept for four years.
Washington's unique combination of B&O tax and expanded sales tax obligations creates complex compliance challenges that multiply across multi-state operations.
Discern streamlines these requirements through automated registration processes, comprehensive compliance tracking, and registered agent services that eliminate the administrative burden of monitoring multiple agency obligations.
Ready to take the stress of Washington compliance off your hands? Book a demo with Discern today.
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