TITLE: Washington B&O Tax Rate Increase to 0.5% in 2027: What Businesses Need to Know
Washington’s Department of Revenue (DOR) has announced that the Business and Occupation (B&O) tax rate will increase to 0.5% for specified business activities starting January 1, 2027. If you sell into Washington, check which classifications apply to your business, update your forecasts, and prepare for new return line codes where relevant.
The increase does not apply to every B&O classification. And B&O is separate from retail sales tax: it is a tax on the business’s Washington activity, not a sales tax collected from customers at checkout.
Check whether your activity is affected
The DOR’s November 2, 2026 special notice lists the activities moving to 0.5% on January 1, 2027. These include:
- Retailing, increasing from 0.471%.
- Wholesaling, manufacturing, and extracting, increasing from 0.484%.
- Processing for hire and non-newspaper printing and publishing, increasing from 0.484%.
- Insurance producers, surplus line brokers, and child care, increasing from 0.484%.
- Radioactive waste cleanup, increasing from 0.471%.
- Warehousing, public road construction, government contracting, and chemical dependency centers, increasing from 0.484%.
- Canned salmon labelers and nonprofit research and development, increasing from 0.484%.
- Prescription drug warehousing, increasing from 0.138%.
- Retailing of interstate transportation equipment, increasing from 0.484%.
- Listed manufacturing, wholesaling, and retailing classifications for commercial airplanes, components, and tooling.
The notice specifies the rate for each classification. Do not assume the change affects every type of Washington income your business reports. Review your actual activities and current return classifications to determine which rates apply.
For example, on $100,000 of taxable receipts, a change from 0.471% to 0.5% represents an increase of $29 before any applicable deductions or credits. A change from 0.484% to 0.5% represents $16 on the same amount. These examples show the rate difference only; your actual liability depends on your classification and filing position.
Treat B&O as a business cost, not checkout sales tax
B&O tax is calculated on Washington business receipts under the applicable classification. It is different from retail sales tax, which may need to be collected from customers and remitted to the state.
That distinction matters when you plan prices and margins. The B&O rate increase is a cost of doing business; it is not an additional retail sales tax amount to add to a customer’s checkout calculation. You can review your pricing, but keep B&O accounting separate from sales tax collected.
International sellers should also review their Washington connection. The state’s remote seller guidance describes registration and reporting obligations, including a $100,000 Washington gross receipts threshold for certain remote sellers. The calculation and requirements depend on your circumstances, so check the current DOR guidance rather than relying on a sales-tax-only review.
If you use a marketplace facilitator, it may collect and remit retail sales tax on facilitated sales. That does not automatically settle your B&O responsibilities. Review your direct sales, marketplace activity, Washington receipts, and filing obligations together. Keep evidence of what the facilitator collects and reports, and reconcile it against your own records.
Prepare for new return classifications
Alongside the rate increases, Washington has created new line codes for activities that were previously reported together. Some combined classifications will no longer be available.
The notice says taxpayers may need to add the appropriate classifications manually in My DOR using the “Add/Delete Tax Classifications” button. Take these steps before you file your first 2027 return:
- Review your current return. Identify any combined classifications that include your business activities.
- Check the new DOR classifications. Match each activity to the correct line code and rate.
- Add applicable line codes in My DOR. Do this before filing, so you can report receipts under the right classifications.
- Reconcile your bookkeeping. Make sure sales, refunds, marketplace settlements, and other Washington receipts can be mapped to the appropriate return lines.
Two classifications have new separate line codes but do not receive a rate increase: Radio & TV Broadcasting remains at 0.484%, and Splitting/Processing of Dried Peas remains at 0.138%. If these activities apply to you, use the correct separate classification rather than assuming the new line code means a higher rate.
Monthly filers should pay particular attention to timing: the January 2027 return is due in February 2027. Other filing frequencies have different due dates; confirm yours using the state’s filing frequencies and due dates guidance.
Update forecasts before the new rates begin
Build the new rate into your 2027 forecast before January 1. The change may look small as a percentage, but B&O applies to receipts under the relevant classification, so the impact can add up as Washington sales grow.
Update your:
- Monthly cash-flow and tax forecasts.
- Washington B&O rate settings in accounting or tax software.
- Reconciliation process for direct and marketplace sales.
- Filing checklist for the first 2027 excise tax return.
If you work with US importers of record or hold inventory in the United States, keep import, inventory, and state tax records clearly separated. Import arrangements can affect other compliance workflows, but they do not replace a review of Washington B&O reporting.
UK companies managing this work alongside ecommerce bookkeeping UK processes can also ensure that marketplace settlement reports and Washington sales data reconcile with their wider accounting records. If you are comparing support from an ecommerce accountant UK provider, check that state filings and classification changes are included in the compliance workflow.
Keep the 2028 individual income tax separate
This B&O change is also separate from Washington’s new 9.9% individual income tax on income above $1 million, which is scheduled to take effect for income beginning January 1, 2028. That is a different tax with a different effective date. Do not apply it to your 2027 B&O calculation.
Likewise, Form 5472 penalties relate to a separate federal reporting issue for certain foreign-owned US entities. The Washington B&O rate change does not replace or determine those federal filing requirements.
Frequently asked questions
Does every Washington B&O taxpayer move to a 0.5% rate?
No. The rate change applies to the activities listed in the DOR notice. Other classifications may remain at their existing rates. Check the classification that matches your business activity.
Does a marketplace facilitator collecting sales tax remove my B&O obligation?
Not necessarily. Marketplace sales-tax collection and your B&O reporting are separate matters. Review your direct and marketplace sales together and confirm your filing obligations with current DOR guidance.
Do the new line codes always come with a higher rate?
No. Some classifications receive new separate line codes without a rate increase. Radio & TV Broadcasting stays at 0.484%, and Splitting/Processing of Dried Peas stays at 0.138%.
When does the change take effect, and when is the first return affected?
The new rates apply starting January 1, 2027. Monthly filers will report the January 2027 activity on a return due in February 2027. Confirm your due date based on your filing frequency.