Tax Overview: Washington
Washington does not levy a traditional state income tax on wages. However, since 2022 the state imposes a 7% capital gains tax on gains exceeding $270K (upheld by courts in 2023). The Business & Occupation (B&O) Tax applies to businesses regardless of profitability. State tax issues are primarily tied to sales/use tax, B&O tax, and the capital gains tax for high earners.
Key Tax Facts
- No state income tax on wages
- 7% capital gains tax on gains exceeding $270K (upheld by courts in 2023)
- Business & Occupation (B&O) Tax applies regardless of profitability
- 6.5% state sales tax plus local additions — combined rates among the highest nationally
- Federal tax obligations apply fully — IRS maintains collection authority
- State tax issues primarily business-related plus capital gains for high earners
Common Tax Issues
The capital gains tax is relatively new and creates state-level liability for taxpayers who previously had none
B&O Tax applies to gross receipts regardless of whether the business is profitable — unique enforcement concern
High combined sales tax rates create significant compliance burden for businesses
Recent Tax Changes
- 7% capital gains tax on gains over $270K (upheld 2023)
- B&O Tax applies regardless of profitability
Official Resources
How Tax Advocate Group Helps Washington Taxpayers
Whether you're dealing with the IRS, the Washington Department of Revenue, or both — we provide comprehensive tax resolution services to Washington residents and businesses.