High Technology Issues in Washington: The Tax Environment
January 1999
Overview
This document is intended to provide a framework for a discussion of the tax environment and some of its impacts on the high technology industry in Washington. It is not intended to be a comprehensive analysis of all of the tax issues that may have an impact on this industry.
Washington’s tax base is composed of four major taxing systems:
Sales and use tax
This tax is imposed upon all retail purchases of tangible personal property and selected services within the State. The State rate is 6.5%. Local rates vary but can be as high as 2.1%. This produces a maximum combined state and local rate of 8.6%.(1) This tax is imposed upon the purchaser or user of qualifying property and services.
Business and occupation (B&O) tax
This tax is imposed upon all persons engaged in a business activity within the State. The tax rate varies by activity and is imposed upon the gross receipts of the business. The majority of the tax rates range from approximately 0.5% to 1.5%. A number of Washington cities also impose a B&O tax. The local tax rates, which vary by activity, range from approximately 0.1% to 0.5%.(2)
Real estate and other excise taxes
A real estate excise tax is imposed upon the sale of real property located in Washington. The tax is imposed on the seller of the property. The State tax rate is 1.28%. Local rates vary but can be as high as 1.5%. The combined tax rate in Seattle is 1.78%. Other excise taxes include taxes on hazardous materials, liquor, motor vehicles, utilities, carbonated beverages, and cigarettes.
Property tax
A property tax is imposed on real and personal property located in the State as of January 1.
(1) Maximum rate includes the Regional Transit Authority (RTA) Tax but does not include certain higher rates for rental cars or purchases of meals from restaurants in specially designated districts.
(2) Almost all sizable cities in Washington impose a local B&O tax. Notable exceptions include Redmond and Spokane.