Business and Occupation Tax.  The state business and occupation (B&O) tax is Washington's primary business tax. It is a gross receipts tax measured on the value of products, gross proceeds of sale, or gross income of the business. There are no deductions from the B&O tax for labor, materials, taxes, or other costs of doing business. The B&O tax rate varies by classification (activity). The major rates are: 0.471 percent for retailing activities, 0.484 percent for manufacturing and wholesaling activities, and for service and other activities, either 1.5 percent or 1.75 percent, depending upon the amount of annual gross income of the business. The state B&O tax includes a number of preferential tax rates, credits, exemptions, and deductions as well as several increased rates or surcharges.
 
Tax Preferences.  State law provides for a range of tax preferences that confer reduced tax liability upon a designated class of taxpayer.  Tax preferences include tax exclusions, deductions, exemptions, preferential tax rates, deferrals, and credits.  Washington has over 700 tax preferences, including a variety of sales and use tax exemptions.  Legislation that establishes or expands a tax preference must include a tax preference performance statement that identifies the public policy objective of the preference, as well as specific metrics the Joint Legislative Audit and Review Committee (JLARC) can use to evaluate the effectiveness of the preference.  All new tax preferences automatically expire after ten years unless an alternative expiration date is provided.

Beginning January 1, 2024, a B&O tax credit is allowed for training and education expenses incurred by an employer that:

• manufactures commercial airplanes, airplane components, or tools designed for manufacturing such airplanes or airplane components;
• develops aerospace products, including research, design, and engineering of such products; or
• otherwise engages in advanced manufacturing.

 
Eligible training and education include any program, course, curriculum, or instruction that trains a prospective or current employee on new workplace technology, equipment, or innovation.  The training and education can be completed through an internship or instructor-led program, including programs at institutions of higher education, apprenticeship programs, onboarding programs, or on-the-job training.
 
The credit is for 50 percent of the amount of qualified training and education expenses.
 
Qualifying expenses include:

• payments made by an employer to an institution of higher education, apprenticeship program, credentialed program, certification program, or continuing education program;
• salary, wages, and benefits of an employee who provides training on behalf of an employer; and
• salary and wages for a paid internship.

 
The credit expires July 1, 2024.   A tax preference performance statement directs JLARC to evaluate the changes in employment for employers claiming the tax credit, and the types of training and education methods used by these employers.