Calendar
 |
May 2008 |
 |
|
|
King County offers an attractive tax structure for many types of businesses. Washington State currently ranks sixth highest on the Small Business Survival Index. Washington requires a 2/3 legislative majority in order to raise taxes. The tax system also features a state and local property tax with annual increases subject to statutory limitations and a Business and Occupation Tax based upon gross receipts. Washington State's tax system features:
- No corporate income tax
- No unitary tax
- No inventory tax
- No personal income tax
- No tax on interest, dividends or capital gains
- No sales or use tax on machinery and equipment used in manufacturing operations
- A state and local property tax with annual increases subject to statutory limitations
- A business and occupation (B&O) tax which is based on gross receipts
Retail Sales Tax
The 8.9% retail sales tax in King County is applied to most sales of personal property, retail sales, rental leases and on charges for selected services. The retail sales tax is comprised of a state tax of 6.5% and an optional local tax of 2.3%. An additional 0.5% is applied to restaurant food and beverage purchases. The retail sales tax is paid by the final consumer of an item or service, and remitted to the state by the ultimate seller. Manufacturers are exempt unless a product or service is used internally during the course of their operations. Services subject to the retail sales tax include cleaning, repairing, altering or improving real property and landscaping.
The retail sales tax is not levied on the purchase of any raw materials or parts that become component parts or products manufactured for resale, nor is it levied on the purchase of any item for resale in the regular course of business. Manufacturing machinery and equipment, as well as repairs and replacement parts, are exempt from sales and use taxation. Also exempted are labor services rendered in respect to repairing, cleaning, altering or improving equipment, and machinery and equipment used in manufacturing research and development.
All interstate and foreign sales from an in-state distribution facility are exempt from state and local retail sales taxes. Retail food purchases are not subject to a sales tax and are also exempt from state and local taxes when product delivery and transfer of ownership take place across the state line.
For specific information on tax rates, contact the Washington State Department of Revenue at: http://www.dor.wa.gov or by phone at 1-800-647-7706 (within Washington); 1-800-233-6349 (out-of-state).
Use Tax
A counterpart to the retail sales tax is the use tax. The use tax applies to tangible personal property to which the retail sales tax is not applicable. Rates for the use tax and the retail sales tax are identical from county to county. A common application of the tax is the sale of an automobile between two individuals -- the tax is collected from the buyer by the County Auditor when the vehicle license is transferred and remitted to the state. Use tax is measured by the current "fair market" value of the item, which may be the purchase price if the item is new or the original price less depreciation for used property.
For specific information on tax rates, contact the Washington State Department of Revenue at: http://www.dor.wa.gov or by phone at 1-800-647-7706 (within Washington); 1-800-233-6349 (out-of-state).
Property Tax
Almost all property in King County, real and personal, is subject to assessment and taxation. An important exception is the absence of a state inventory tax. Real property, which includes land, structures, and/or improvements, is evaluated for tax purposes in one of three ways: sales or assessment based on the selling price of comparable property; income or potential income if the property were developed to its highest and best use; and cost or replacement value.
The cost method is applied to manufacturing, while the income method is used primarily on commercial property. The average statewide property tax is $13.53 per $1,000 assessed value.
With the exception of port and public utility district levies, the total of regular levies (not voted on by the taxpayers) constitutionally cannot exceed one percent of the true and fair value of any taxpayer's property. Total regular levy revenues are limited to a 6% annual increase, excluding new construction. No property tax is assessed upon intangibles such as monies, stocks, bonds and mortgages.
For specific information on tax rates, contact the King County Department of Assessments at (206) 296-7300.
Business and Occupation Tax
| Major B&O Tax Classifications |
Rates |
| Retailing |
.00471 |
| Retailing of Interstate Transportation Equipment |
.00484 |
| Manufacturing - Other (including aluminum) |
.00484 |
| Wholesaling --Wheat, Oats, Corn, Barley... |
.00011 |
| Wholesaling -- Other (including cigarettes) |
.00484 |
| Service and Other Activities |
.015 |
| Insurance Agents/Brokers |
.0055 |
The State of Washington levies a tax on business activity measured by gross proceeds from sales, gross income of the business, or the value of products resulting from activities conducted within the state. This tax, known as the Business and Occupation (B&O) Tax, is imposed only on gross receipts generated within Washington State. Virtually all businesses are subject to the B&O Tax. The rates vary depending on the type of business activities, and range from .011% to 5.029%. For example, in the case of manufacturing, this means that $4.84 is collected for every $1,000 of gross sales. Businesses with gross receipts of less than $1,000 per month are exempt from B&O Tax payments. Some cities also apply a B&O Tax to sales made by businesses physically located withing the city and on sales to customers located in cities that have a B&O Tax.
Under the B&O tax, a number of exemptions, deductions and deferrals are permitted, including research and development activities, agricultural production, interstate sales by retailers or wholesalers, sale or rental of real estate, credit losses and cash discounts.
For specific information on tax rates, contact the Washington State Department of Revenue at: http://www.dor.wa.gov or by phone at 1-800-647-7706 (within Washington); 1-800-233-6349 (out-of-state).
|
|
|
