Washington State Income Tax is Zero, But Your Business Bill Isn't: The B&O Trade-Off
Washington stands out because it does not tax wages. In other words, Washington state income tax is 0. This policy attracts employees and establishment owners who desire to keep more of their paycheck. Yet, the state revenue system still collects funds through sales tax & property levies and the capital gains excise tax. Taxpayers should look at the total expense list — not just the 0 percent rate on their pay stub.
Does Washington have a state income tax?
No — Washington has no individual income tax as well as no corporate income tax — based on net income.
If there’s no wage tax, what washington state taxes show up instead?
Washington leans on other sources. Therefore, residents generally feel taxes through what they buy & own or do.
- Sales tax on purchases — it is paid this at the register — the state base rate is 6.5%, and cities & counties add their own portions and raise the final
- Use tax — it applies when goods are purchased out of state or online without paying sales tax then brought into Washington for use
- Property tax — for homeowners, property taxes (mostly set at local levels) may be a major recurring cost even though Washington has no state wage income tax
How does the Washington capital gains tax work?
Washington imposes a capital gains excise tax on specific long-term capital asset sales like stocks & bonds, business interests, and similar items — after exclusions and a standard deduction.
For 2026 planning, the major subject is the tiered rate structure Washington announced for taxable Washington capital gains:
Important considerations:
- It’s not a wage tax — it applies to qualifying long-term gains, not salary
- The threshold is about the taxable Washington capital gains amount — not the total income
- It can matter even if you moved late in the year — varying on residency & when the sale occurred
What should establishments focus on when “income tax” isn’t the headline?
For establishments, Washington state income tax isn’t the planning driver. The system in Washington is built around distinct rules.
In other words, you pay tax on your total income — and business expenses do not lower this liability.
Washington business tax checklist
- Confirm the activity type — B&O rates & classification have the potential to change in parallel to what you sell or do
- Set up sales tax collection in case of retail sales — the rate varies with where the customer receives the goods & services
- Track out-of-state sales & multi-state work — nexus might appear fast for contractors and remote teams as well as online sellers
- Plan for professional bookkeeping from day one — in Washington, gross-receipts taxes & sales tax filings punish messy records
How does Washington compare with California for taxes?
These 2 states leverage opposing models to fund their operations. One relies on high income tax. The other leans on sales & gross receipts taxes. The "better" option completely varies with your distinct financial profile and housing costs as well as spending habits.
A high-level comparison table presented below:
What should you do before or after a move to Washington?
When moving, precise dates prevent tax overlap & mismatched reporting.
- Establish a firm date — use lease agreements & closing papers or utility bills to prove exactly when you arrived
- Fix payroll immediately — stop withholding for the previous state as soon as residency changes
- Document investment values — if you plan to sell assets, acknowledge how the capital gains excise tax treats that transaction in line with the residency status
- Update business licenses — moving operations changes the jurisdiction & collection duties
Maris & Associates can help with Washington tax planning
Maris & Associates presents professional support to individual taxpayers and establishments in taking confident actions around Washington state income tax questions, multi-state moves, and year-end planning, as well as Washington business filings.
If you need a concrete plan before relocation, selling an investment or starting an establishment, reach out to us today. Our experts will map the next best actions in accordance with your facts.
FAQs
Is it cheaper to live in WA or CA?
The answer simply relies on the specific financial habits. Employees tend to keep more of their paycheck in Washington since the state does not tax salaries. However, high sales tax rates & property prices might lower such savings.
California hits high earners harder with major income tax levies — though property expenses & local assessments are distinct by region. Review the projected earnings, housing needs, and monthly expenses, as well as investment exits, in order to recognize which location wins.
What is the most tax-friendly state in America?
There isn’t one “best” state for everyone. A state that’s great for a W-2 paycheck may be less attractive for retirees or investors & business owners. The full picture should be checked: income taxes & sales taxes, property taxes, business taxes and any special excise taxes that could impact the situation.
Does Washington have higher taxes than California?
Not on wages. However, overall totals still have the potential to surprise people. Washington collects more through sales & business taxes. On the other side, California relies more on income tax. The better option varies with the specific income level, how much you spend, whether you own properties, and how you earn your money.