Introduction to Washington Business Taxes

Transcription

1 Introduction to Washington Business Taxes Washington State Department of Revenue Maureen O Connell, September 30, 2017

2 Objectives Provide information on major taxes in Washington Provide helpful contacts and resources Answer your questions

3 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

4 Registration Process Complete a Business License Application Online at 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

5

6 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

7 Washington is One of Three States with a Gross Receipts (Business and Occupation) Tax WA OR NV CA ID AZ UT MT WY CO NM ND MN SD NE KS OK WI IA IL MO AR MS NH VT ME MA MI NY RI CT PA OH* NJ IN WV VA DE KY MD NC TN SC AL GA AK AK TX LA FL HI

8 Washington is 1 of 7 states that has no state Income Tax WA OR NV CA ID AZ UT MT WY CO NM ND SD NE KS OK MN WI IA IL MO AR MS VT NY MI PA OH IN WV VA KY NC TN SC AL GA ME MA RI CT NJ MD AK AK TX LA FL HI

9 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

10 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)

11 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

12 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

13 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.

14 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% %

15 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

16

17 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

18 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

19 Retailing B&O Tax Examples of services: Custom construction/repair Tanning Physical fitness Lawn maintenance, tree trimming Rental equipment (bare rental or with operator)

20 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.

21 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

22 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

23

24 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

25 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

26 Service & Other B&O Tax Accountants, bookkeepers, doctors, attorneys, consultants Hair Dressers Janitorial Services Custom Software Web site design WAC

27 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

28 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 WAC

29 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

30 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

31 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

32 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

33 Determining Sales Tax Rates Local Sales & Use Tax Flyer online at GIS look-up also available online Call our Telephone Information Center at Download the free Tax Look-up APP available Android and IOS at App Store

34

35 Food products Newspapers Prescription drugs Exemptions 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

36

37 What is use tax? 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

38 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

39 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

40 DOR Services Telephone Assistance (tax line) (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.

41

42 DOR Services Written rulings or Taxpayer Information & Education Department of Revenue PO Box Olympia, WA

43 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

44 THANK YOU Questions?