Category Archives: Tax Issues

Ask SCORE: What is the Washington State B&O Tax?

from the Department of Revenue…

The B&O tax (short for “Business & Occupation Tax”) is a gross receipts tax. It is measured on the value of products, gross proceeds of sale, or gross income of the business.

Washington, unlike many other states, does not have an income tax. Washington’s B&O tax is calculated on GROSS income from activities. This means there are no deductions from the B&O tax for labor, materials, taxes, or other costs of doing business.

The Business and Occupation (B&O) tax is a gross receipts tax levied on a business for the privilege of doing business in Washington. Almost all businesses located or doing business in the state of Washington are subject to the state B&O tax. It is an out-of-pocket cost for engaging in business activities.

The classification and rate of the B&O tax are based on the type of business activity conducted in this state. A business may perform more than one type of activity. Businesses performing multiple activities may be subject to tax under one or more B&O tax classifications.

Learn more about the Washington State B&O Tax. 

Learn about your city’s B&O Tax rates. 

Ask SCORE: As a business owner, how should I pay myself?

This is an excerpt from an article by Hal Shelton for score.org. Read more here.

Pay Strategies

Depending on the maturity of your company and your plans for the business, you may adopt different compensation strategies.

  • Start-up mode: It is typical for a start-up to be cash-flow negative in its early months, if not years. This results from one-time start-up expenses like buying equipment, building out a facility, stocking inventory, marketing to attract customers, building products or websites, legal and accounting costs, and rent and utility deposits. Also at start-up, there are no or few customers. As such, during these times, your compensation will be light as there are no funds to pay more. Hopefully, you had prepared a business plan, including a cash-flow forecast, so you knew the range of your compensation during this period, and if there was not enough to “live on,” you have made other arrangements.
  • Lifestyle vs. ramp and sell: If you intend to own and operate your company for many years, which is what 95 percent of entrepreneurs plan, then you will want to develop, over time, a predictable compensation plan both to meet your personal needs and be predictable for yourself and the company.

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What Tax Records Should You Keep… And For How Long?

tax-records

Except in a few cases, the law does not require any specific kind of records. However, you may want to include all of these items, no matter what process of recordkeeping is chosen:

  • Business checkbook
  • Daily summary of cash receipts
  • Monthly summary of cash receipts
  • Check disbursements journal
  • Depreciation worksheet
  • Employee compensation record
  • Any financial statements

Also, be diligent in keeping these records as well, whether it be the original source documents OR electronic copies:

  • Gross receipts
  • Inventory
  • Expenses
  • Travel, transportation, entertainment & gift expenses
  • Employment taxes
  • Assets
  • Cancelled checks

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