Why Washington Cities Are Looking to Collect Business & Occupation Tax Locally

Local leaders in Washington state have to be creative. With a 1% property tax levy limit, they are constrained in their ability to meet the needs of their growing cities.

To ensure a stable revenue stream for their communities, over 50 cities collect a local Business & Occupation (B&O) tax, and we anticipate many more will follow suit based on our conversations with leaders across the state.

Why Collect a B&O Tax?

B&O tax revenues are unrestricted and may be used for any lawful governmental purpose.

This locally-collected tax is in addition to the B&O tax imposed by the state of Washington. B&O tax is a gross receipts tax. It is measured on the value of products, gross proceeds of sale, or gross income of the business.

How to Start Collecting a B&O Tax?

The cities across the state that are currently collecting a B&O tax adhere to a model ordinance to ensure uniformity across the state for things like penalty, interest provisions, and payment periods.

Best Practices for Managing B&O Tax Collections and Compliance

Cities collecting B&O tax may adhere to the same mandatory provisions, but they manage tax filings and compliance very differently.

While a few cities utilize a shared portal, most rely on paper forms for tax filings. This can create a lot of additional work for time-strapped teams.

Tax management software built for government offers two important benefits:

1. 20% more business entities registering and paying on time, which results in more revenue.
2. 95% payment accuracy by ensuring that business owners know the amount they owe.

Cities utilizing an effective software solution save up to 20 hours a week on manual work, which frees staff to focus on closing the non-compliance gap.