Article
Washington B&O tax reconciliations of apportionable income
Sept. 8, 2021 · Updated Aug. 16, 2024 · Authored by Adam Cline, Sarah Correia
Businesses that are subject to the Washington State business and occupation (B&O) tax and reported apportionable income — royalties or services and other activities, for example — in 2023 are required to submit an Annual Reconciliation of Apportionable Income by Oct. 31, 2024. Extensions may be requested by contacting the Department of Revenue prior to the filing deadline. Late filing fees may apply.
Conducting business in Washington
The state of Washington applies an economic-nexus standard rather than a physical-presence nexus standard to certain activities. This means an out-of-state business without any physical presence in Washington may in fact be doing business in Washington and is required to file the annual reconciliation, in addition to filing Washington combined excise tax returns.
Calculating apportionable revenue
In general, businesses with apportionable income attribute their receipts within and outside of Washington based on where the customer receives the benefit of the service, using a receipts-factor formula. In this case, the numerator is Washington annual apportionable revenue, and the denominator is worldwide annual apportionable revenue less what’s known as annual throw-out receipts.
Since many taxpayers are required to file monthly or quarterly tax returns, the state allows them to estimate current taxable income using a prior-year annual-receipts factor.
Consequently, taxpayers are required to reconcile the actual-receipts factor to determine any refund or incremental tax due on account of reconciliation. The annual reconciliation must be filed regardless of whether the calculation results in an adjustment of tax reported and paid during 2023.
Apportionable income
Taxpayers with apportionable income include, but aren’t limited to, those filing under the following B&O tax activities and operations:
- Services and other activities
- Royalties
- Travel agents and tour operators
- International business activities, including steamship agent, customs house broker, freight forwarder, vessel or cargo charter broker in foreign commerce, and air cargo agent
- Stevedoring and associated activities
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.