Business and occupation tax

The business and occupation tax (often abbreviated as the B & O tax) is a type of tax levied by the U.S. states of Washington, West Virginia, and, as of 2010, Ohio, and by municipal governments in West Virginia and Kentucky.

It is a type of gross receipts tax because it is levied on gross income, rather than net income. While deductions are not permitted for labor, materials, or other overhead expenses, the State of Washington does allow certain deductions, exemptions, and credits, by statute.

The rate of taxation is not uniform for all businesses. Rather, different types of businesses are taxed at different rates, depending upon their classification by the Washington State Legislature and the Washington State Department of Revenue.Service industry businesses have the heaviest tax burden, with a tax rate of 1.5%, more than triple the other major classifications.

Income from exempt activities need not be listed on the B & O tax return. Items claimed as deductions, however, must be listed as part of gross income before it can be taken as a deduction.

Tax credits for the B & O tax can be due to a taxpayer who overpaid his/her taxes for the prior fiscal year. Additionally, the Legislature has specially created tax credits for certain types of activities.

All exemptions, deductions, and credits are provided for by Chapter 82.04 of the Revised Code of Washington (the chapter which is the legislative basis for the B & O tax) and Title 458 of the Washington Administrative Code (the regulations of the Washington Department of Revenue). Certain provisions of these laws operate in a similar manner as the Internal Revenue Code and U.S. Treasury Regulations. For example, bad debt can be deducted from the B & O tax in much the same way as it can be deducted from the federal income tax.

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