Washington Administrative Code
Title 458 - Revenue, Department of
Chapter 458-20 - Excise tax rules
Section 458-20-104 - Small business tax relief based on income of business
Current through Register Vol. 24-06, March 15, 2024
(1) Introduction. This rule explains the business and occupation (B&O) tax credit for small businesses provided by RCW 82.04.4451. This credit is commonly referred to as the small business B&O tax credit or small business credit (SBC). The amount of small business B&O tax credit available on a tax return can increase or decrease, depending on the reporting frequency of the account and the net B&O tax liability for that return. This rule also explains the public utility tax income exemption provided by RCW 82.16.040. The public utility tax exemption is a fixed amount, or threshold, based on the reporting frequency assigned to the account. Readers should refer to WAC 458-20-22801 (Tax reporting frequency-Forms) for an explanation of how the department of revenue (department) assigns a particular reporting frequency to each account. Readers may also want to refer to WAC 458-20-101 for an explanation of Washington's tax registration and tax reporting requirements.
This rule provides examples that identify a number of facts and then state a conclusion regarding the applicability of the income exemption for the public utility tax or small business B&O tax credit. These examples should be used only as a general guide. The tax results of other situations must be determined after a review of all facts and circumstances.
(2) The public utility tax income exemption. Persons subject to public utility tax (PUT) are exempt from payment of this tax for any reporting period in which the gross taxable amount reported under the combined total of all public utility tax classifications does not equal or exceed the maximum exemption for the assigned reporting period. Per RCW 82.16.040, the public utility tax exemption amounts are:
for taxpayers reporting monthly ............... |
$2,000 per month |
for taxpayers reporting quarterly .............. |
$6,000 per quarter |
for taxpayers reporting annually ............... |
$24,000 per annum |
(3) The small business B&O tax credit. Persons subject to the B&O tax may be eligible to claim a small business B&O tax credit against the amount of B&O tax otherwise due. The small business B&O tax credit operates completely independent of the public utility tax exemption described above in subsection (2) of this rule. RCW 82.04.4451 authorizes the department to create a tax credit table for use by all taxpayers when determining the amount of their small business B&O tax credit. Taxpayers must use the tax credit table to determine the appropriate amount of their small business B&O tax credit. A tax credit table for each of the monthly, quarterly, and annual reporting frequencies can be found on the department's internet site at dor.wa.gov.
The statute provides that taxpayers who use the tables will not owe any more tax than if they used the statutory credit formula to determine the amount of the credit. For taxpayers that file electronically, the department will automatically calculate the small business credit when the taxpayer completes the online return.
Effective January 1, 2023, section 1, chapter 295, Laws of 2022 amended RCW 82.04.4451. Prior to that amendment the small business credit was calculated at a maximum of $70 multiplied by the number of months in the reporting period for all eligible taxpayers. As a result of the amendment, taxpayers that report at least 50 percent (i.e., 50 percent or greater) of their total B&O taxable amount under RCW 82.04.255 (real estate brokers), RCW 82.04.290(2)(a) (service and other activities), and RCW 82.04.285 (contests of chance) have their maximum credit increased to $160 multiplied by the number of months in the reporting period. A few examples of businesses that generally have taxable amounts to report under RCW 82.04.290(2)(a) are for-profit hospitals, for-profit research and development, accountants, attorneys, dentists, janitors, and landscape architects. Please see WAC 458-20-224, Service and other business activities for information and more examples of who should report under the service and other classification of the B&O tax.)
For taxpayers that do not report at least 50 percent of their B&O taxable amount under RCW 82.04.255, 82.04.290, and 82.04.285, prior to the amendment the small business credit was calculated at a maximum of $35 multiplied by the number of months in the reporting period. As a result of the amendment, the maximum credit increased to $55 multiplied by the number of months in the reporting period.
(4) Multiple business and occupation tax credit worksheet. The small business B&O tax credit should be computed after claiming any other B&O tax credits available under Title 82 RCW (Excise taxes). Examples of other B&O tax credits to be taken before computing the small business B&O tax credit include the multiple activities tax credit and commute trip reduction credit. The following multiple B&O tax credit worksheet describes the process taxpayers must follow to apply credits in the appropriate order. Refer to subsection (6) of this rule for an example illustrating the use of the multiple B&O tax credit worksheet.
MULTIPLE B&O TAX CREDIT WORKSHEET |
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1. |
Determine the total Business and Occupation (B&O) tax due from the B&O section of your excise tax return. |
$ _________ |
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2. |
Add together the credit amounts taken for: |
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Multiple Activities Tax Credit from Schedule C (if applicable). |
$ _________ |
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(Add any other B&O tax credits from Title 82 RCW that will be applied to this return period.) |
+ |
$ _________ |
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Total (Enter 0 if none of these credits are being taken.) |
$ _________ |
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3. |
Subtract line 2 from line 1. This is the total B&O tax allowable for the Small Business Credit. |
$ _________ |
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4. |
Find the specific tax credit table (Table 1 or Table 2) appropriate for the business activities and B&O taxable amounts on your excise tax return. Next, find the tax credit table which matches the reporting frequency assigned to the account. Then find the range of amounts which includes your total B&O tax due (see line three above). |
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5. |
Read across to the next column. This is the amount of the Small Business Credit to be used on the excise tax return. |
$ _________ |
(5) Using the tax credit table to determine your small business B&O tax credit. The following steps explain how to use the small business B&O tax credit table:
(6) Examples - Using the "Multiple B&O Tax Credit Worksheet" and the tax credit tables.
Statutory Authority: RCW 82.32.300 and 82.01.060(2). 10-23-058, § 458-20-104, filed 11/12/10, effective 12/13/10. Statutory Authority: 2009 c 521. 10-09-050, § 458-20-104, filed 4/15/10, effective 5/16/10. Statutory Authority: RCW 82.32.300 and 82.01.060(2). 04-14-052, § 458-20-104, filed 6/30/04, effective 7/31/04. Statutory Authority: RCW 82.32.300. 98-16-019, § 458-20-104, filed 7/27/98, effective 8/27/98; 97-08-050, § 458-20-104, filed 3/31/97, effective 5/1/97; 95-07-088, § 458-20-104, filed 3/17/95, effective 4/17/95; 83-07-034 (Order ET 83-17), § 458-20-104, filed 3/15/83; Order ET 70-3, § 458-20-104 (Rule 104), filed 5/29/70, effective 7/1/70.