Washington B&O tax and out-of-state LLCs

A tax on gross receipts, not on profit

Washington's business and occupation tax, the B&O, taxes gross income of the business, not net profit. An LLC that barely breaks even on Washington work can still owe, because the tax is charged on what came in, before expenses.

The rate for most service businesses is published in the statute itself. RCW 82.04.290 taxes the gross income of service and other business activities at 1.5 percent for a person whose gross income of the business for the immediately preceding calendar year was less than one million dollars, and at 1.75 percent from one million up to five million.

The B&O is why the registration question and the tax question must be asked separately. Registering with the Secretary of State settles who may do business; the Department of Revenue's registration settles who pays tax, and the two tests are different statutes.

1.5 percentRCW 82.04.290 taxes most service business gross income at 1.5 percent below $1,000,000 of preceding-year gross income, and 1.75 percent up to $5,000,000. — Washington State Legislature, Revised Code of Washington, retrieved 2026-09-29

The $100,000 receipts threshold

An LLC formed in another state owes the B&O when it has substantial nexus with Washington. The statute sets the receipts limb at more than one hundred thousand dollars of cumulative gross receipts from this state in the current or immediately preceding calendar year.

The count is broader than Washington invoices alone. The statute defines cumulative gross receipts to include all of a person's gross income of the business attributed to Washington, with apportionable income counted through the receipts factor numerator and other income allocated under the sourcing rules.

The threshold is measured across the whole calendar year, current or preceding. Fourteen thousand dollars a month of Washington work crosses one hundred thousand dollars in the eighth month, and the obligation does not wait for the year to close before it attaches.

$100,000RCW 82.04.067 deems an out-of-state business entity to have substantial nexus with Washington on more than one hundred thousand dollars of cumulative gross receipts from the state. — Washington State Legislature, Revised Code of Washington, retrieved 2026-09-29

RCW 82.04.067(2)(a) counts all of a person's gross income of the business attributed to Washington toward the cumulative gross receipts threshold. — Washington State Legislature, Revised Code of Washington, retrieved 2026-09-29

The slightest-presence rule

The second limb to nexus is physical presence, and Washington sets the bar in a phrase: physical presence in this state, which need only be demonstrably more than a slightest presence.

The statute defines what counts. A person is physically present if they have property or employees in this state, or if the person, directly or through an agent or other representative, engages in activities in this state significantly associated with establishing or maintaining a market for its products.

This is the limb that catches working trades. A single crew, a single trailer of equipment, or a single sales agent crossing the line regularly is physical presence, with no dollar threshold to hide behind. The tax attaches on the presence, even in a year the receipts are small.

RCW 82.04.067(1)(c)(ii) and (3) define physical presence as property or employees in the state, or an agent's market-building activities, at more than a slightest presence. — Washington State Legislature, Revised Code of Washington, retrieved 2026-09-29

The tax can arrive before the registration obligation

The corporate-registration list and the tax nexus test are different statutes, and Washington keeps them apart on purpose. RCW 23.95.520's list of activities that are not doing business ends with a subsection saying the list does not apply in determining the contacts that may subject a foreign entity to taxation.

That means the carve-outs do not travel. Employing a remote worker in Washington is not doing business under the corporate chapter, but an employee in Washington is physical presence under the tax chapter. The isolated thirty-day job is safe from the registration statute and can still cross the tax line the following year.

An out-of-state LLC can therefore owe Washington B&O in a year it owes no Foreign Registration Statement, or owe both, or owe neither. Run both tests, every year, against the actual facts of routes, crews, and receipts.

RCW 23.95.520(4)RCW 23.95.520(4) states the doing-business list does not apply in determining contacts that may subject a foreign entity to taxation or regulation. — Washington State Legislature, Revised Code of Washington, retrieved 2026-09-29

The tax registration is a separate filing

Paying B&O starts with registering the business, and the registration is not the Secretary of State's. The Department of Revenue runs the Business License Application, assigns the Unified Business Identifier number, and collects the city, county, and state endorsements on the way.

The order is fixed. An LLC files with the Secretary of State before the Business License Application, which for a foreign LLC means the Foreign Registration Statement comes first, then the tax registration, then the endorsements.

Timing is worth planning. Online license applications take approximately ten business days to process, with an additional two to three weeks when city or state endorsements are involved, and mailed applications can take up to six weeks. A start date with permits behind it needs the calendar run backward, which is exactly what the expansion checklist does.

10 business daysThe Department of Revenue states online business license applications take approximately 10 business days, endorsements add 2-3 weeks, and mailed applications up to six weeks. — Washington Department of Revenue, retrieved 2026-09-29

What to do with the numbers

Take the two tests in order. First the corporate one: is the Washington work doing business under RCW 23.95.505 and 23.95.520, answered on the doing-business page and filed through the registration guide.

Then the tax one: do the receipts cross one hundred thousand dollars, or is there property, employees, or a market-building agent in the state. Either limb registers the LLC with the Department of Revenue and starts the B&O filings.

Keep the two answers on one page with the year's fees. The cost breakdown carries the Secretary of State side, and the trade pages carry whatever the work itself stacks on top, from electrical licenses to county health permits. A tax question with real money in it is worth a call to a Washington-practicing accountant before the first filing, not after.

RCW 82.04.067RCW 82.04.067 gives an out-of-state business entity substantial nexus with Washington on over $100,000 of Washington gross receipts, or on physical presence. — Washington State Legislature, Revised Code of Washington, retrieved 2026-09-29

Questions