Washington LLC Taxes

Washington’s bustling job market and easy access to nature make it a popular place in which to live and start a business. Yet, as more business owners choose to start their ventures in this state, many may find it challenging to understand the business taxes involved. 

Regardless of the size of your business, if you operate a limited liability company (LLC) in Washington, you’ll need to stay up to date on your finances and pay federal, state, and local taxes. Our guide will help you understand which taxes you must pay for your Washington LLC.

Recommended: Schedule a free consultation with an accountant to stay on top of your taxes. 

Washington LLC Taxes Owed

LLCs benefit from pass-through taxation, which means the business’s profits pass through to its members’ individual tax returns. As a result, your LLC itself doesn’t pay taxes to the federal government or the state of Washington. Instead, LLC owners must pay taxes on their portion of the income generated by the LLC. 

In Washington, LLC owners can expect to pay the following taxes:

Federal Taxes

Regardless of where your business is located, if you have an LLC within the United States, you will have to pay federal income taxes and federal self-employment taxes. These taxes are reported on your Form 1040.

Federal Self-Employment Taxes

It doesn’t matter if your LLC is a single-member LLC or a multi-member LLC; all LLC members must pay self-employment taxes on their share of the LLC’s profits. The self-employment tax rate is 15.3%. 

Federal Income Taxes

Your federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets, as well as the percent owed, will change each year.

Washington State Taxes

Each state has its own laws that dictate how it taxes individuals and businesses. For instance, Washington doesn’t have its own state income tax.

Washington Income Taxes

As noted above, Washington doesn’t impose a state income tax on residents or businesses. You’ll still need to pay federal income tax, but you won’t have to directly pay the state for your profits.

Washington Business and Occupation Tax

While Washington has no state income tax, businesses operating within the state do have to pay a business and occupation tax. Based on your business’s gross income, this tax must be paid online after you register with the Washington State Department of Revenue. The state taxes different types of businesses at different rates.

For more information on this tax and how it may affect your business, visit the Business and Occupation Tax page of the Washington State Department of Revenue website.

Washington Sales and Use Tax

Washington has a state sales tax rate of 6.5%. While this isn’t too high by itself, many Washington counties and cities levy their own local sales taxes. With an average rate of 2.36%, these local sales taxes make the combined average 8.86% — one of the highest sales tax rates in the country. Learn about any local sales taxes in your area before you start doing business.

Register for a Washington State Business License

Rather than obtaining individual licenses from their local municipality, businesses can register with the Washington State Department of Revenue for a state business license — often referred to as a “bulk registration.” If your business sells taxable goods or services, you must register for a state business license because it’ll enable your business to file a sales and use tax return.

You can register for a state business license on the Washington State Department of Revenue website.

Additional State Taxes

The Washington State Department of Revenue oversees the collection of various state-specific taxes businesses may have to pay, depending on their location, industry, and number of employees. A few examples of these additional taxes include:

  • Commercial Vessel Tax
  • Heavy Equipment Rental Tax
  • Natural Gas Use Tax
  • Refuse Tax
  • Solid Fuel Burning Device Tax

For more information, visit the Other Taxes page on the Washington State Department of Revenue website.

Washington Local Taxes

The local laws and ordinances in Seattle may differ greatly from those in Tacoma. Regardless of where you live in Washington, check with your local jurisdiction to ensure your business obtains the proper local permits and follows any local regulations that may impact its operations.

Washington LLC Compliance

You must obey Washington’s state and local laws in order to maintain your business in good standing. While LLCs technically don’t file taxes with the state, Washington businesses must still file an annual report each year.

Washington LLC Annual Report

All Washington LLCs must file an annual report with the Washington Secretary of State each year. You can do this by mail or online for a filing fee of $60.

Annual reports are due on the last day of your LLC’s anniversary month — the month in which the state approved your LLC’s formation. If you miss the due date, the state will add a $25 penalty to your filing fee. If you still haven’t paid the filing fee and penalty 90 days after the due date, the Washington Secretary of State will shut down your LLC immediately.

To learn more about this process, check out our Washington LLC Annual Report guide.

LLC taxes are complex. While our guide can provide you with important information, we recommend you schedule a free consultation with an accountant to ensure you handle your business taxes correctly.