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.

While the standard B&O tax rate for manufacturing is 0.484 percent, there are a number of manufacturing sectors that have lower preferential rates.  Examples include:

• semiconductor materials—0.275 percent;  
• various agricultural goods manufactured into refined products—0.138 percent;
• seafood products—0.138 percent;
• dairy products—0.138 percent;
• fruit or vegetable products—0.138 percent;
• aluminum—0.2904 percent; and
• solar energy systems using photovoltaic modules or stirling converters—0.275 percent.

In 2020, the preferential B&O tax rate for the manufacturing, wholesaling, and retailing of commercial airplanes and airplane components of 0.357 percent was eliminated, and the rate of 0.484 percent was instituted. 

The following manufacturing tax rate multipliers are reduced to zero:

• manufacturers, and this tax multiplier is expanded to include processors for hire;
• semiconductor materials; 
• various agricultural goods into refined products; 
• seafood products; 
• dairy products; 
• fruit or vegetable products;
• commercial airplanes or components of such planes beginning July 1, 2021; 
• aluminum; and 
• solar energy systems using photovoltaic modules or stirling converters.

These preferential rates are only applicable to out of state activity.