What is Washington’s franchise tax?

Washington does not have a franchise tax. In fact, the state does not impose a franchise tax, corporate income tax, or personal income tax. Instead, Washington’s primary business tax is called the “Business & Occupation (B&O) tax,” which is a gross receipts tax applied to the total revenue of businesses operating in the state, regardless of profitability

Unlike franchise or income taxes, B&O hits your total revenue before you subtract any expenses like payroll or cost of goods. The Washington Department of Revenue maintains an updated list of classifications and rates covering retailing, wholesaling, manufacturing, and services.

The B&O tax catches almost everyone doing business in Washington. It taxes the privilege of doing business, not your profits.

All entity types fall under its umbrella: 

• C corporations 
• S corporations 
• LLCs 
• Partnerships 
• Sole proprietorships 
• Nonprofits with taxable activities.

Additional state taxes

Washington's B&O tax is just the beginning. The state adds several other taxes that stack on top without reducing your B&O liability, so budget for them separately rather than treating them as minor costs.

Common additions include: 

• Retail sales tax (collected from customers) 
• Use tax on items consumed in Washington when sales tax wasn't charged 
• Public utility tax for utility providers
• Hazardous substance tax for certain chemicals and petroleum products.

Then there's the municipal tangle. Each city applies its tax independently of the state, creating two sets of deadlines, two sets of rates, and sometimes two definitions of "taxable income."

Penalties and compliance

Missing your Washington B&O tax filing deadline brings serious consequences that escalate quickly. This includes: 

• Loss of good standing status
• Potential business license revocation
• Legal action, including liens and bank account garnishment

• 9% penalty - Starts immediately after the due date
• 19% penalty - Applied after approximately 35 days late
• 29% penalty - Applied after approximately 65 days late

Automate your Washington compliance with Discern

Washington B&O tax calculations—with multiple classification rates and overlapping municipal requirements—need your tax accountant's expertise.

Discern handles a different part of your compliance picture: we file your Washington annual reports, maintain your registered agent coverage, and track deadlines across every jurisdiction where you operate.

Book a demo to see how Discern keeps you in good standing across all 50 states and DC.