Upload
others
View
3
Download
0
Embed Size (px)
Citation preview
Introduction to Washington Business Taxes
Washington State Department of Revenue
Maureen O’Connell, September 30, 2017
Objectives
• Provide information on major taxes in Washington
• Provide helpful contacts and resources
• Answer your questions
Registration
Most businesses operating in Washington are required to register with DOR
You must register if any of the following apply:
Your business is required to collect sales tax
Gross annual income is $12,000 or more
You business is required to pay taxes or fees to the Department of Revenue
Registration Process
• Complete a Business License Application
– Online at www.bls.dor.wa.gov
– In person at a local office of the Dept. of Revenue, Secretary of State, Dept. of Labor & Industries, or the Employment Security Office
– By Mail
WASHINGTON’S 3 MAJOR TAXES
• Business & Occupation (B&O) Tax/Public Utility Tax (PUT)
• Retail Sales & Use Tax
• Property/Personal Property Tax
Washington does not impose an Income Tax
WA
OR
ID
TX
AZ
MT
CA
NV
CO KS
OK
MO
LA
SC
NC
IL
MN
WI
MI
IN
NY
OH*
MD
DE
NJ
CT
RI
MA
VT
NH
ME
PA WY
UT
NM
ND
SD
NE IA
KY
TN
WV VA
AR
MS AL GA
FL AK
HI
AK
HI
Washington is One of Three States with a Gross Receipts (Business and Occupation) Tax
Washington is 1 of 7 states that has no state Income Tax
WA
OR
ID
TX
AZ
MT
CA
NV
CO KS
OK
MO
LA
SC
NC
IL
MN
WI
MI
IN
NY
OH
MD
NJ
CT
RI
MA
VT ME
PA WY
UT
NM
ND
SD
NE IA
KY
TN
WV VA
AR
MS AL GA
FL AK
HI
AK
HI
WA
OR
ID
TX
AZ
MT
CA
NV
CO KS
OK
MO
LA
SC
NC
IL
MN
WI
MI
IN
NY
OH
MD
Delaware
NJ
CT
RI
MA
VT
New
Hampshire
ME
PA WY
UT
NM
ND
SD
NE IA
KY
TN
WV VA
AR
MS AL GA
FL AK
HI
AK
HI
Sales Taxes are imposed in 45 states
What is an Excise Tax
• It is a tax on specific transactions or privileges.
– Retail sales tax is the largest excise tax in WA
– Business & Occupation (B&O) tax is the major business tax in WA
– Property Tax and Personal Property Tax (administered by the county)
Business & Occupation (B&O) Tax
The major business tax is the B&O tax Gross receipts tax
Intended to be a cost of doing business
Various classifications (34)
– Retailing, wholesaling, manufacturing, service & other activities…
Classification is based on the specific activity
RCW 82.04
Measure of the B&O Tax
• B&O tax is computed on the selling price or gross contracted price:
– Selling price is defined to be all “consideration” received by the seller.
– This includes all labor and services
There are no deductions from the B&O tax for costs of doing business
B&O Tax Classifications
• Choosing the right B&O tax classification to file under is based on the business activity conducted. Some business will have 1 classification while others will have multiple classifications based on the types of services or products they offer their customer.
Most Common B&O Taxes/Rates
• Retailing Rate - .471%
• Wholesaling Rate - .484%
• Manufacturing Rate - .484%
• Service & Other Activities Rate – 1.5%
• Other specialized B&O tax rate range between .013% - 1.63%
When do I pay my taxes
• After registering your business the Department will determine your reporting frequency. This is based on the information you provide on your Business License Application.
• There are 4 filing frequencies – monthly, quarterly, annual, active non-reporting
Taxable Amount
• B&O tax and retail sales tax are computed on the selling price or gross contract amount
• No deduction for cost of material used, labor or service, taxes imposed on the seller
• Retail sales tax must be separately stated
Retailing B&O Tax
• In general, sales of tangible personal property and charges for labor and services performed on tangible personal property or real property, for consumers
• Specific activities as defined by law – lodging, telephone services, physical fitness service, auto parking, amusement and recreation services
Documentation required if sales tax not collected
Retailing B&O Tax
Examples of services:
• Custom construction/repair
• Tanning
• Physical fitness
• Lawn maintenance, tree trimming
• Rental equipment (bare rental or with operator)
Wholesaling B&O Tax
• Selling goods & certain services to persons who will resell them to others without intervening use
• Buyers must provide the seller with their Reseller Permit to document the sales tax exempt purchase.
Reseller Permit
• All sales of a retail nature will be classified as retail sales unless a resale certificate is obtained
• Single purchase or blanket certificate
• Only recording the purchaser’s UBI number is not sufficient
• When purchasing goods for resale, you must provide the supplier with a reseller permit
DO NOT GIVE AWAY YOUR ORIGINAL PERMIT
Reseller Permit
• Issued by Department of Revenue to business making sales for resale
• Not issued to business not making purchases for resale
• Free
• Each permit has different number
• Application process (if not issued automatically)
• Database use to verify permits
• Taxable Amount for Tax Paid Source deduction
Manufacturing B&O Tax
• Tax is imposed on the local activity of manufacturing
• Manufacturing is creating a new, different or more useful product
• Gross income is reported under Manufacturing and also the Retailing or Wholesaling classifications WAC 458-20-13601
Manufacturing B&O Tax
Examples
• Making jewelry
• Boat building
• Fabrication of dental appliances
• Cutting, delimbing, and measuring of felled, cut, or taken trees
• Wood crafted items: • Bird houses
• Furniture items
Service & Other B&O Tax
• Accountants, bookkeepers, doctors, attorneys, consultants
• Hair Dressers
• Janitorial Services
• Custom Software
• Web site design
WAC 458-20-224
B&O Deductions
Deduction income is reported then subtracted
Examples:
• Bad debts
• Interstate and foreign sales
• Returns and allowances
• Other – must explain & is subject to verification by the Department
One More Business Tax
Public utility tax
Public and privately owned utility sewer, water distribution and power
Companies that transport persons or property for hire Delivery trucks, taxicabs, moving trucks, and limos WAC 458-20-179 WAC 458-20-180
Retail Sales Tax
• It is the largest excise tax levied in Washington
• Trust Fund money
• Consumer based tax computed on total selling price – buyer to pay seller to collect
• Tax on sale, rental, repair, or installation of tangible personal property (includes labor)
• Also includes any charges for freight or shipping
• Collected by the seller and held in trust for the state
Retail Sales Tax
• Sellers must remit over-collected tax
• Seller is liable for the sales tax even if they failed to collect it or collected it at the wrong rate
• Sales tax must be separately stated on the invoice
Who is Subject to Sales Tax
• Everyone is subject to sales tax unless otherwise exempted by statute:
– Federal Government
– Red Cross
– Specific manufacturing equipment
– Sales to qualifying tribal members
– Specific farming equipment
Place of Sale
If item is sold and picked up at your store:
-the sales tax rate of where store is located
If item is delivered to your customer:
-the tax rate shifts to where the items are
delivered
If a sale of retail services :
-the tax rate is based on the location of where the retail service is provided
Determining Sales Tax Rates
• Local Sales & Use Tax Flyer – online at www.dor.wa.gov
• GIS look-up also available online
• Call our Telephone Information Center at 800-647-7706
• Download the free Tax Look-up APP available Android and IOS at App Store
Exemptions
Food products
Newspapers
Prescription drugs
Sales to Indians -delivered to reservation
Certain purchases by qualifying artistic or cultural organizations
Manufacturing machinery and equipment
Interstate and foreign sales
Sales to certain nonresidents
Use Tax
What is use tax?
– Companion to the sales tax
– Is due when goods are acquired for use in Washington without payment of sales tax
Due on the value of article used
Local tax - location of first use
Buyer must report use tax on the excise
tax return (Individuals use Consumer Use Tax Return)
WAC 458-20-178
Use Tax
• Use tax due:
– Magazine subscriptions
– Mail order or internet purchases
– Goods purchased in Oregon
– Purchases from a person not required to
collect sales tax (individuals)
– Office supplies and equipment
The Audit Process
The Department audits about 2 percent of businesses each year
Verify correct tax classification
Reconcile gross receipts
Verify wholesale sales, exemptions and deductions
Use Tax
DOR Services
Telephone Assistance
1-800-647-7706(tax line)
1-800-451-7985(licensing)
Personal and 24-hour
automated services
Available Monday,
Tuesday, Thursday, &
Friday 8 a.m. - 5 p.m.
Wednesday 9 a.m. – 5 p.m.
DOR Services
Written rulings
• [email protected] or
• Taxpayer Information & Education
Department of Revenue
PO Box 47478
Olympia, WA 98504-7478
Other DOR Services
• E-File
• Tax Rate Lookup Tool
• Publications and Guides
• Secure Message System
• Speakers Bureau
• Business Licensing & renewals
• Taxpayer Rights Advocate Service
• Tax Workshops
THANK YOU
Questions?