This is the twelfth FAQ of this series on taxes for Canadian businesses in the USA.
What state taxes does a Canadian business pay in Washington state?
The base sales tax rate in Washington state is currently 6.5%. The rate can range from 6.5% to 10.5% depending on local municipalities.
The use tax rate in Washington state is currently 6.5%.
B&O Taxes (Use Tax)
Washington has a gross receipts tax. This means you pay taxes on the total amount of revenue you pull in for your business, whether you make a profit or not. Depending on the type of goods or services you are offering, rates vary from 0.471%-1.5%. Monthly returns are due on the 25th of the following month; quarterly returns are due by the end of the month following the close of the quarter, and the due date for the annual returns is April 15th.
Public Utility Tax
Instead of the B&O tax, the Public Utility Tax applies to public service businesses, including businesses that engage in transportation, communications, and the supply of energy, natural gas, and water. Depending on the specific utility activity, rates vary from 0.642% – 5.029%.
Unemployment Tax (Payroll Tax)
If you have employees working in Washington, you must pay unemployment taxes on their gross wages up to the taxable wage base ($52,700 as of 2020). The average tax rate in 2019 was 1.03%. Tax and wage reports are due quarterly.
Business Income Tax (Income Tax)
There is no income tax in Washington state. However, people or businesses that engage in business in Washington are subject to business and occupation (B&O) and/or public utility tax.
If you remain under certain thresholds in this state you are not responsible for taxes.
Availability of Treaty Benefits:
Canada interprets the B&O tax to be an income tax and thus you get a credit in Canada for B&O tax paid in Washington State.
If you are considering business in Washington State, including sales over $100,000 to residents and businesses in Washington State, please contact a member of the EPR tax team by completing the contact form below. Our tax experts can advise on the best structure to reduce or minimize the impact of the taxes.
Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. EPR Maple Ridge Langley, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.