Washington lesson 5 of 6
The state Business License and Washington's B&O tax
Washington has no state personal or corporate income tax, but nearly every LLC still needs a state business license and most owe the Business and Occupation tax on their gross receipts.
The Business License Application
Most Washington businesses must register with the Department of Revenue through a Business License Application, which is required if you plan to hire employees within 90 days, sell goods or services that require collecting retail sales tax, use a trade name, or need city, county or state endorsements. The base processing fee to open a new business is $50, and additional endorsements or trade name registrations add their own fees.
How B&O tax works
B&O tax is charged on gross receipts, not profit, so it applies whether or not the LLC is making money. Rates depend on the business activity: 0.471 percent for retailing, 0.484 percent for wholesaling and manufacturing, and a tiered rate for services and other activities starting at 1.5 percent for businesses under $1,000,000 in prior-year Washington revenue, rising to 1.75 percent and then 2.1 percent at higher revenue tiers.
Retail sales also require collecting Washington's retail sales tax from the customer, in addition to the retailing B&O classification on the seller's own revenue.
A services LLC with thin margins can owe real B&O tax in a loss-making year, because the tax does not look at net profit at all.
Cities and other registrations
Some Washington cities, including Seattle, levy their own local B&O tax on top of the state tax for businesses with a nexus there. If you hire employees, register separately with the Employment Security Department for unemployment insurance and with Labor and Industries for workers' compensation.
Key takeaways
- A state Business License Application with the Department of Revenue is required for most Washington LLCs.
- B&O tax is calculated on gross receipts and varies by activity, from 0.471 percent for retailing up to 2.1 percent for higher-revenue service businesses.
- Some cities add their own local B&O tax on top of the state rate.
Frequently asked questions
Is the Washington Business License Application the same as forming the LLC?
No. The Certificate of Formation with the Secretary of State creates the legal entity. The Business License Application with the Department of Revenue registers it for state tax and licensing purposes, and it is a separate step and fee.
Does a Washington LLC pay state income tax?
No. Washington has no personal or corporate income tax. The main state-level tax most LLCs face is the Business and Occupation tax on gross receipts.
Official sources
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Last reviewed: September 2026 - reviewed by Gullia Filing Legal & Formation Team