Washington's major business tax is the business and occupation (B&O) tax.  The B&O tax is imposed on the gross receipts of business activities conducted within the state, without any deduction for the costs of doing business.  Businesses must pay the B&O tax even though they may not have any profits or may be operating at a loss.

A taxpayer may have more than one B&O tax rate, depending on the types of activities conducted.  Major B&O tax rates are 0.471 percent for retailing; 0.484 percent for manufacturing, wholesaling, and extracting; and 1.5 percent for services and for activities not classified elsewhere.  Financial institutions are subject to the 1.5 percent service and other B&O tax rate.

Entities engaged in banking, loan, security, or other financial businesses may deduct interest on investments or loans secured by mortgages or deeds of trust.  This exemption is limited to community banks, which are located in less than ten states.

Beginning August 1, 2021, the deduction of interest on investments or loans secured by first mortgages or deeds of trust for entities engaged in banking, loan, security, or other financial businesses is repealed.  The statute that limited the deduction to community banks is also repealed.  The interest and related fees would become fully taxable.  By October 15, 2022, and each October 15th thereafter, the Department of Revenue is directed to estimate any increase in state general fund revenues as a result of repealing this deduction.  After informing the state treasurer of any increase, the state treasurer must transfer that amount from the general fund into the housing trust fund beginning November 1, 2022, and by each November 1st thereafter.  The Department of Revenue may not make any adjustments to the estimate after the state treasurer makes the fund transfer.