In May 2025, Governor Bob Ferguson enacted a package of tax legislation that includes substantial revisions to the state’s Business and Occupation (B&O) tax. The new legislation introduces higher rates, new surcharges, and clarified deductions, thereby impacting a broad spectrum of businesses operating within the state.
B&O Tax Rate Increases
- Service and Other Activities: Effective October 1, 2025, the following progressive rate structure will apply to gross income
- 1.5% under $1 million
- 1.75% for $1 million – $5 million
- 2.1% for over $5 million
- Manufacturing, Wholesaling, and Retailing: Starting January 1, 2027, the standard B&O tax rates will increase to 0.5% from their current rates.
Modified Surcharges
- High-Grossing Business: A new 0.5% levy will be applied to businesses with Washington taxable income exceeding $250 million.
- Financial Institution: The supplemental tax on specified financial institutions will increase from 1.2% to 1.5%.
- Advanced Computing: The advanced computing surcharge will escalate significantly from 1.22% to 7.5%, with an elevated annual cap of $75 million.
Resources:
To ensure your ongoing compliance, we strongly advise you to regularly consult the Washington State Department of Revenue’s official website for the most current information and guidance. A valuable resource where you can look up the relevant rate for your business based on its specific location and taxable income can be found here:
