In 2015, Washington ranked 11th among the 50 states on the Tax Foundation’s Index of Business Taxes. By comparison, Oregon ranked 12th; Idaho, 19th; and California, 48th.
These rankings are significant. Companies locate where there is the greatest opportunity for financial success and the greatest competitive advantage. Washington’s 11th place rating demonstrates the competitive nature of the tax system and the benefits to companies relocating or expanding to this area.
Washington’s Tax Advantages include:
- B&O tax has low flat rates and is easy to calculate;
- No corporate or personal income tax;
- No tax on intangibles or capital gains;
- Property tax rates that are moderate, predictable, and near the national average.
Doing Business in Washington State
Washington State is consistently ranked as one of the best places to start a business. The state has more than 250,000 businesses registered, from one-person start-ups to some of the most familiar names in retailing, aircraft, software, and outdoor recreation equipment. If you plan to be the next Amazon.com, Microsoft or Boeing, here are some resources to help you open your business and position it for success.
Office of Regulatory Innovation and Assistance
The Governor’s Office of Regulatory Innovation and Assistance (ORIA) offers great information and resources for small business and permit projects. Staff members are available to answer any questions related to local and state government regulations. The Small Business Guide is a helpful tool for all phases of business.
Washington State is consistently ranked as one of the best places to start a business.
Access Washington
Access Washington offers great one-stop shop that includes nearly everything you need, from how to choose a business structure to licensing requirements. Washington State is definitely open for business, and this portal will give you a jump start on getting your business up and running quickly.
The Business Roadmap, is an easy to follow introduction to doing business in Washington State.
Secretary of State
If the business structure you’ve chosen is a corporation, limited liability company, or limited partnership, you will need to register that company with the Office of the Secretary of State first, or have your attorney do it for you.
Registration with the Office of the Secretary of State is simple, just be sure to properly plan by using the Washington State Small Business Guide.
More than half of all new businesses in Washington State file with the Secretary of State’s office.
Wage Rate
The 2015 Washington minimum wage is $9.47. Washington’s minimum wage applies to workers in both agriculture and non-agricultural jobs, although 14- and 15-year-olds may be paid 85% of the minimum wage ($8.05).
No Corporate and Personal Income Tax
The state of Washington is one of only seven states that do not levy a corporate, unitary, or personal income tax. Washington State does not tax inventory and there is no tax on interest, dividends, or capital gains.
The absence of income taxes greatly reduces the administrative costs associated with payroll management. In addition, the no income tax environment tends to increase worker satisfaction with paychecks not reduced by withholdings.
Also, not paying income taxes provides substantial benefit to entrepreneurs and highly compensated individuals through retention of their gross income.
Unemployment Insurance Tax
Employers in the state pay for unemployment benefits through unemployment taxes. Unlike the workers’ compensation program, employees do not make contributions to unemployment taxes.
In Washington, the state unemployment tax has two components:
- An experience-rated tax, based on an average of an employer’s claim history.
- A social-cost tax, paid to cover the shared costs of the total insurance system.
The experience rate and the social-cost rate are added together to determine an employer’s total tax rate.
Workers’ Compensation
While the Department of Labor and Industries (L&I) manages a number of occupational safety and health programs, it is best known as the administrator of the State’s workers’ compensation (industrial insurance) program.
Washington is the only state with workers’ compensation tax rates based on the number of hours worked per employee. Premiums are not collected for a worker on sick leave, vacation, holidays, or leave of absence.
While the company pays the majority of the insurance premium, employees also make a contribution. Historically payments by employees have reduced direct premium costs for employers by 20-40%.