HomeMy WebLinkAboutBusiness and Occupation Tax Guide (1/18/2024)Guide to the City of Tukwila's
Business and Occupation (B&O) Tax
Published: January 18, 2024
Effective: January 1, 2024
ABOUT THIS GUIDI
This guide provides an overview of the City
of Tukwila's B&O tax and is intended for
general informational purposes only. Not all
possible applications of tax are discussed. It
is current at the time of publication, but
potential future changes in the Tukwila
Municipal Code (TMC) or state law may
impact the information in this guide. In the
event of a conflict between the information
presented in this guide and an ordinance of
the City of Tukwila, the ordinance prevails.
Specific details relating to the tax are
provided in TMC Chapters 3.26 and 3.27,
online at ecords.tukwilawa.gov/weblink.
If you need assistance, please contact us:
Email: tax@tukwilawa.gov
Mail: City of Tukwila
Finance Department
6200 Southcenter Blvd
Tukwila, WA 98188
A list of frequently asked questions is online
at tukwilawa.gov/citytaxes. To request a
meeting at City Hall in person, please
contact us to schedule an appointment.
B&O TAX GENERAL OVERVIEW
The B&O tax applies to business revenues
earned beginning January 1, 2024. Payment
of the tax is limited to persons earning gross
income in Tukwila of more than $750,000 in
the calendar year. The measure of tax is the
gross income, gross proceeds of sales, and
value of products manufactured or
extracted in Tukwila. There is no deduction
on account of any costs, expenses, or losses.
Tukwila's B&O tax returns are filed
separately from and in addition to any other
federal, state, or local tax returns.
B&O tax returns must generally be filed on a
quarterly basis by the last day of the month
following the end of the quarter. The city
may alternatively assign an annual filing
frequency at its discretion.
Tax Period Payment Due
January 1— March 31 April 30
April 1— June 30 July 31
July 1— September 30 October 31
October 1— December 31 January 31
If approved to file annually, annual returns
are due by April 30 of the following year.
The city may assign an active non -reporting
status to businesses with gross income
beneath the taxable threshold. It is the
responsibility of the business to notify the
city if the $750,000 threshold is exceeded.
Penalty ($5 minimum) and interest apply
when a return is not paid timely, as follows:
Period Returns Overdue Penalty Rate
1 day to 1 month 9 percent
1 month to 2 months 19 percent
Over 2 months 29 percent
City of Tukwila B&O Tax Guide
TAX REGISTRATION/LICENSING
B&O tax registration is completed by
obtaining a City of Tukwila business license
endorsement. The annual license fee varies
depending on whether the business is
within or outside of Tukwila city limits and
the number of employees in Tukwila. The
city uses the Washington State DOR for its
business license applications. To apply for a
business license, go to dor.wa.gov/tukwila.
TAX FILING FRLQUENCY
B&O tax returns are due quarterly unless an
annual filing frequency has been approved.
Returns must be filed regardless of whether
tax is due for the reporting period. Upon
being issued a city business license, we will
mail a letter to the business that explains
the assigned tax filing frequency.
Businesses that won't exceed the $750,000
annual threshold may contact the city to
request an active non -reporting status.
HOW TO FILE AND PAY RETURNS
The City of Tukwila's tax return forms are on
our website at tukwilawa.gov/citytaxes. Tax
returns must be submitted by mail with a
check or money order, or can be delivered
to City Hall in person to:
City of Tukwila
Finance Department
6200 Southcenter Blvd
Tukwila, WA 98188-2544
Payments submitted by mail will be
considered filed on the date shown on the
postmark by the postal service, or the date
payment is received if there is no postmark.
TAX CLASSIFICATIONS AND RATE!
The B&O tax classification and rate depends
on the type of business activity. Businesses
conducting multiple activities may need to
report in more than one tax classification.
This guide provides a brief overview of each
tax classification and the method for
attributing income to Tukwila. Not all
possible applications of tax are included.
Tax Classification Tax Rate
Retailing 0.05% (0.0005)
Retail Service 0.05% (0.0005)
Wholesaling 0.085% (0.00085)
Manufacturing 0.085% (0.00085)
Processing for Hire 0.085% (0.00085)
Extracting 0.085% (0.00085)
Extracting for Hire 0.085% (0.00085)
Printing/Publishing 0.085% (0.00085)
Service and Other 0.085% (0.00085)
Retailing/Retail Sales
Includes sales of tangible personal property
and pre -written software, except to persons
who provide a resale certificate under RCW
82.04.470, and sales to consumers of digital
products, extended warranties, and lodging.
Also includes various services performed for
consumers, including installing, repairing,
altering, or improving tangible personal
property; and constructing, repairing, or
improving buildings or other structures.
Revenue from retail sales is allocated to the
location where the activity takes place. In
the case of sales of tangible personal
property and digital goods, the activity takes
place at the location where delivery to the
buyer occurs. Revenue from sales of goods
delivered to the buyer outside of Tukwila
are deductible from the measure of tax.
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City of Tukwila B&O Tax Guide
Retail Service
Includes amusement & recreation services;
physical fitness services; renting tangible
personal property to consumers; landscape
maintenance; credit bureau services; and
abstract, title insurance, and escrow
services. Revenue is allocated to the
location where the activity takes place.
Wholesaling
Includes sales of tangible personal property,
digital products, or pre -written computer
software which are not retail sales. Also
includes charges for labor and services
rendered for persons who are not
consumers, if such charge is expressly
defined as a retail sale or retail service
when rendered to or for consumers.
Revenue is allocated the same as retailing.
Manufacturing
Includes all activities wherein labor or skill is
applied by hand or machinery to materials
or ingredients so that, as a result thereof, a
new, different or useful product is produced
for sale or for commercial or industrial use.
The measure of tax is the value of products
and byproducts manufactured within the
City of Tukwila, irrespective of where the
goods are sold. The value of products is
generally determined by the selling price.
Refer also to the Multiple Activities Tax
Credit (MATC) discussion on page 4.
Processing for Hire
The performance of labor and mechanical
services upon materials or ingredients
belonging to others so that as a result
thereof a new, different, or useful product is
produced for sale or commercial/industrial
use. Revenue is allocated to the location
where the processing activity takes place.
Extracting
Includes activities such as mining,
quarrying, or taking coal, natural gas, stone,
sand, mineral, fish, or any other natural
resource. The measure of tax is the value of
products and byproducts extracted within
the City of Tukwila, irrespective of where
the goods are sold. The value of products is
generally determined by the selling price.
Refer also to the Multiple Activities Tax
Credit (MATC) discussion on page 4.
Extracting for Hire
Labor or mechanical services performed
under contract for an extractor. Revenue is
allocated to where the activity takes place.
Printing or Publishing
This classification applies to businesses
engaging in any of the following activities:
(a) printing; (b) publishing newspapers,
periodicals, or magazines; or (c) both
printing and publishing newspapers,
magazines, periodicals, books, music, or
other printed items.
Revenue from the activities of printing, and
of publishing newspapers, periodicals, or
magazines, is allocated to the principal
place within Washington from which the
business is directed or managed. If the
business' principal location is in Tukwila,
refer also to the MATC discussion on page 4.
Service and Other Activities
Includes every business activity for which no
other specific tax classification applies. This
includes lawyers, doctors, accountants,
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City of Tukwila B&O Tax Guide
architects, consultants, janitorial services,
instructional lessons, custom software, and
a variety of other professional services and
revenues. The taxable service income in
Tukwila is generally determined using the
apportionment method described below.
CFRVIrF APPf1RTIf1NIVIFNT
Persons engaging in business inside and
outside of Tukwila who earn income subject
to tax under the Service and Other Activities
tax classification generally must calculate
their taxable income using the method
described in TMC 3.26.077(F). The service
apportionment calculation and instructions
are on Schedule A of the tax return.
The service apportionment formula involves
two factors: (1) the ratio of service income
in Tukwila to companywide service income,
and (2) the ratio of payroll costs in Tukwila
to companywide payroll costs. The average
of these two factors is multiplied by the
companywide service income to calculate
the taxable service income in Tukwila.
MULTIPLE ACTIVITIES TAX CREDIT
(MATC)
Persons subject to tax under the Extracting,
Manufacturing, or Printing tax classifications
must also report their gross proceeds of
sales under the retailing and/or wholesaling
classifications (with deductions for sales of
goods delivered outside of Tukwila). This
may cause income to be reported twice
under multiple tax classifications. The MATC
ensures that B&O tax is paid only once by
the business on the same amount.
The MATC is calculated on Schedule C.
The MATC may also be claimed by persons
who pay an eligible gross receipts tax in
another local jurisdiction on extracting,
manufacturing, or printing activities and sell
the products in Tukwila. See TMC 3.26.070.
DEDUCTIONS
The following are common deductions that
may be claimed from the measure of tax,
which must be itemized on Schedule B.
Details and additional deductions are
provided in TMC 3.26.100 and 3.26.075.
• Receipts from tangible personal
delivered to the buyer outside the city
• Cash discount taken by the purchaser
(does not apply to manufacturing tax)
• Credit losses (bad debts) of accrual basis
taxpayers
• Interest on investments or loans secured
by mortgages or deeds of trust
EXEMI' I IUN.
The following business activities are exempt
from B&O tax and should not be reported
on the tax return. Details and additional
exemptions are provided in TMC 3.26.090.
• Sale or rental of real estate
• Producing or selling motor vehicle fuel
• Producing or selling liquor
• 501(c)(3) nonprofit organizations, except
retail sales are taxable
• Amounts derived from activities subject
to the city's utility tax or gambling tax
• Public card rooms
• Professional, semi-professional, and
amateur sports teams
• Casual or isolated sales
• Employees
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City of Tukwila B&O Tax Guide
GROSS RECEIPTS THRESHOLD
Payment of the B&O tax is limited to
businesses with taxable amounts of more
than $750,000 per calendar year. Unless
active non -reporting has been approved by
the city, every business must file a return
and report its gross income and deductions
regardless of whether tax is due.
If a quarterly filer is uncertain whether it
will exceed the $750,000 annual threshold,
the business may elect whether to pay the
tax when a return is filed. If payment is not
made and the threshold is later exceeded,
then the tax must be paid on the quarterly
returns due for the remainder of the year
and an annual reconciliation must be filed
and paid by January 31 of the following year
to pay any remaining tax due for the year.
PENALTIES AND INTEREST
Various penalties and interest are imposed
when tax is not paid timely or is underpaid.
The most common penalties include:
• Late return penalty of nine (9) to 29
percent of the tax due when a return is
not filed and paid by the due date.
• Assessment penalty of five (5) percent
when the city determines that tax has
been substantially underpaid, which
increases up to 25 percent if an invoice
is paid after the invoice due date.
• Unlicensed business penalty of five (5)
percent when a person engages in
business without a city business license.
Daily interest is charged on late returns and
on invoices issued for additional tax due,
and credit interest is granted on refunds.
OTHER B&O TAX PROVISIONS
Every person doing business in Tukwila is
obligated to know his or her tax reporting
responsibilities. Businesses may contact the
city to obtain general assistance, request an
extension prior to the due date, or to
request written tax reporting instructions.
Businesses must keep records for a period
of five years after a return is filed. The
records must be sufficient to determine the
amount of any fee or tax for which the
person may be liable. All books, records,
invoices, federal and state tax returns, and
other data must be open for examination at
any time by the city's authorized agent.
If a person disagrees with the amount of tax
determined to be due, an appeal may be
filed within 30 calendar days from the date
on which notice of the tax was given by the
city. The notice of appeal must state the
grounds for the appeal and explain in detail
why the amount of tax was incorrect.
VIricmLIlT IHAL.
In addition to the B&O tax, the city imposes
other business taxes on certain activities in
the city, which are filed on separate tax
return forms. Additional information can be
found online at tukwilawa.gov/citytaxes.
• Utility tax is imposed on the following
activities: telephone business, cable TV,
electricity, natural gas, and solid waste
(including recycling).
• Admissions tax on admission charges.
• Gambling tax on gambling activities.
• Commercial parking tax on commercial
parking business.
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