Washington LLC formation: the B&O tax state
No corporate income tax — but a gross-receipts B&O tax that hits from dollar one. Here is how the Evergreen State actually works.
Contents 10 sections
ashington State is a paradox for founders. It advertises itself — legitimately — as having no corporate or personal income tax. That single fact draws a steady stream of LLCs from California and Oregon. But Washington then recovers the revenue through the Business & Occupation (B&O) tax, a gross-receipts tax that applies to almost every dollar of revenue, whether or not the business is profitable.
Overview
If you plan to form in Washington, the B&O tax is the single most important thing to understand. This guide covers the filing mechanics, the B&O regime, and the practical checklist for a 2026 formation.
The filing, in brief
- Filing office: Washington Secretary of State, Corporations Division.
- Form: Certificate of Formation, filed online through the Corporations & Charities Filing System.
- State fee: $200 online ($180 paper — but online is fastest and standard).
- Processing: 2–3 business days for online filings.
- Annual report fee: $70, due by the end of the LLC's anniversary month.
- Initial report: Due within 120 days of formation ($10 fee). This is in addition to the annual report.
The B&O tax, explained
Washington's B&O tax is assessed on gross receipts — not profit. There is no deduction for cost of goods sold, salaries, rent, or any other expense. Rates vary by classification:
- Service & other activities: 1.5% (or 1.75% for businesses with gross income over $1M).
- Retailing: 0.471%.
- Wholesaling: 0.484%.
- Manufacturing: 0.484%.
There is a small-business credit that eliminates B&O for businesses below roughly $100,000 in annual gross receipts (the threshold varies by classification and is adjusted periodically), but once you exceed it, B&O is due on every dollar.
For a service LLC grossing $500,000 with a 20% profit margin, B&O tax is $7,500 — 7.5% of actual profit. That is steeper than many state corporate income taxes, and it is payable regardless of whether the LLC made money.
Register for B&O as part of your Business License Application with the Department of Revenue (dor.wa.gov). This is a separate process from the SOS filing.
Initial report, then annual reports
Washington requires two reports in year one:
- Initial report, due within 120 days of formation. $10. Lists governors (members/managers) and registered agent.
- Annual report, due by the end of the anniversary month. $70.
Miss the annual report and the LLC is administratively dissolved after 60 days of delinquency. Reinstatement costs $140 plus back fees.
Registered agent
Washington requires a registered agent with a physical (not P.O. box) address in the state, available during business hours. The agent may be an individual Washington resident or a registered commercial agent. LLC members who live in Washington may serve. Non-residents cannot.
City-level licensing — do not skip this
Washington has unusually strong city-level licensing. Seattle, Bellevue, Tacoma, and most other cities require their own business license on top of the state registration, typically with their own B&O tax. Seattle's city B&O alone can exceed 0.5% of gross receipts. If you operate from a Washington address, check the city's finance department site before budgeting.
Taxes at the state level
- No corporate income tax.
- No personal income tax.
- B&O tax on gross receipts.
- Sales tax: 6.5% state + local (typically 2–4%), total ~9–10% in most metros.
- Capital gains tax: 7% on long-term capital gains over ~$270,000 (post-2021 — upheld by the state supreme court, and it applies to individuals including LLC members).
When Washington makes sense
- You live in Washington and want a home-state LLC.
- You have high profit margins — B&O hurts less when your margin is 50%+.
- You operate primarily in retail, wholesale, or manufacturing, where B&O rates are under 0.5%.
- You want to avoid a state-level income tax on your personal draws.
When it does not
- You run a low-margin service business. A 1.5% B&O on gross can exceed what you would pay in income tax elsewhere.
- You live out of state. Washington B&O applies based on nexus to Washington, not residency of owners — forming here does not shelter income earned in your home state.
- You need to pass through clean state tax treatment for partnership investors. The B&O tax is an entity-level tax; it cannot be passed through the way income tax can.
The short checklist
- Check name availability on the CCFS portal.
- Appoint a Washington-resident registered agent.
- File the Certificate of Formation online; pay $200.
- Submit the initial report within 120 days ($10).
- Apply for a UBI number via the state Business License Application (dor.wa.gov); this registers you for B&O.
- Check city licensing at your operating address.
- Obtain an EIN from the IRS.
- File the FinCEN BOI report within 30 days.
- Calendar the annual report ($70) for your anniversary month and quarterly B&O payments.
Washington is a good state for some businesses and a painful one for others. The B&O tax is not optional, not deferrable, and not negotiable. Model it into your pricing before you file.