Washington Tax Rates

Washington’s tax system relies primarily on consumption based and business activity taxes rather than income based taxes. Indinero offers support for tax services for people who refer to this material and need help understanding or managing their Washington tax obligations.

Income Tax

Washington does not impose a personal income tax.

Key points:

  • No state tax applies to wages, salaries, or most investment income.
  • Residents do not file a state personal income tax return.
  • Federal income tax rules still apply.
  • Certain high income capital gains may be subject to a separate state level capital gains tax, which is treated differently from a general income tax and applies only to specific transactions.

Sales Tax

Washington administers a statewide sales and use tax on most retail sales of tangible personal property and many services.

Key points:

  • The state rate is 6.5 percent.
  • Cities, counties, and other local jurisdictions add local sales taxes. Combined rates vary widely and may exceed 10 percent in some areas.
  • Many services are taxable, including digital goods, lodging, and various labor services.
  • Exemptions apply to groceries, prescription drugs, and certain manufacturing equipment.
  • Businesses that sell taxable items must collect sales tax, keep accurate records, and file periodic tax returns.

Property Tax

Property tax is administered at the local level and is an important revenue source for schools, counties, cities, and special districts.

Key points:

  • Properties are assessed annually at market value.
  • State law imposes limits on annual property tax revenue growth for taxing districts.
  • Property tax applies primarily to real estate. Some business personal property is also taxable unless exempt.
  • Rates vary by location due to differences in local levies.

Business and Occupation Tax

Washington’s primary tax on businesses is the Business and Occupation tax, which is based on gross receipts rather than net income.

Key points:

  • The tax applies to nearly all businesses operating in the state.
  • Rates vary by business classification, such as retailing, wholesaling, and service activities.
  • Deductions are limited because the tax is applied to gross receipts.
  • Businesses must register, report gross income, and remit the tax regardless of profitability.

Public Utility Tax

Washington imposes a Public Utility tax on businesses that provide utility services.

Key points:

  • The tax applies to industries such as energy, water, telecommunications, and transportation.
  • Rates depend on the type of utility service.
  • This tax is separate from the Business and Occupation tax.

Excise Taxes

Various excise taxes apply to specific goods and activities.

Key points:

  • Examples include taxes on fuel, alcohol, tobacco, vapor products, and cannabis.
  • Rates vary by product type.
  • Businesses engaged in these industries must follow registration, licensing, and reporting requirements.

R&D Offer Quiz

Step 1 of 3

Answer to find out if you're eligible for R&D tax credits.

Do the activities performed relate to a new or improved business component’s function, performance, reliability, quality, or composition?(Required)
For Example: A mid-sized packaging company develops a slightly modified cardboard box design to improve its stacking strength (reliability) for warehouse storage, involving minor adjustments to the corrugation pattern to reduce collapse under standard weight loads.
Is your company trying to discover information to eliminate uncertainty concerning the capability or method for developing or improving a business component?(Required)
For Example: A furniture manufacturer investigates whether a cheaper wood adhesive can hold joints as effectively as the current one during assembly, testing bond strength to resolve doubts about its capability in standard production lines.
Do the activities performed constitute a process of experimentation?(Required)
For Example: An auto parts supplier runs a series of bench tests on different lubricant formulations to find one that reduces friction in engine bearings more effectively, systematically comparing wear rates over simulated operating cycles.