Business & Occupation Tax

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B&O Tax Classifications

The most common B&O tax reporting classifications for restaurants include: retailing, wholesaling and service and other activities.

Retailing: Gross income from sales to consumers of prepared food, poured spirits, soft drinks, cigarettes and items of tangible personal property.

Wholesaling: Gross income from sales of any taxable item to persons other than consumers. For example, sales of prepared food to a nonprofit organization that is reselling the food as part of a fundraising activity.

Note: To purchase at wholesale, exempt from sales tax, the purchaser must have a resellers permit issued by the Department of Revenue (WAC 458-20-102).

Service and other activities: Gross income from “other” sources including: compensation or commissions received for allowing placement of coin-operated machines on the premises (coin-operated telephones, ATM machines, cigarette machines, candy, etc.), income from pull-tab, punchboard, bingo games and allowing patrons access to the Internet. (See the Games, Gambling and Other Income section. Note: Washington cities may also impose a B&O tax. The Department of Revenue does not administer the B&O tax imposed by cities.

B&O Tax Exemptions and Deductions

The law allows an exemption or deduction from the measure of the B&O tax for the following: Interstate sales: Prepared food delivered to customers outside the state. For example, pizza. Bad debts or dishonored checks: The net amount (before tax) of a dishonored check may be deducted to the extent it was taken as payment for goods or services and was included in amounts previously reported. A deduction may be taken when the debt is actually charged off the books of account.

Note: Any amounts subsequently recovered must be included in gross income and reported.

B&O Tax Credit for Syrup Tax Paid

Retailers that pay syrup tax when buying carbonated beverage syrup to make carbonated fountain drinks can claim a business and occupation (B&O) tax credit.

Requirements for the B&O Tax Credit:

Syrup must be used by the buyer in making carbonated drinks sold by the buyer;

Credit must be claimed in the tax reporting period when the syrup was purchased;

Unused credit may be carried forward to future reporting periods for a maximum of one year (12 months from the end of the tax reporting period when the credit was earned); Credit may not exceed the B&O tax due; and No refunds for credits.

References: RCW 82.08.0293; WAC 458-20-119; 458-20-124; 458-20-244 and 458-20-196.

 

 

Rev. 12/3/14

 


This article is an excerpt from the Handbook for Excellent Restaurant Operations (HERO), published by the Washington Hospitality Association.  Want a hard copy of the whole manual?  It’s one of the many benefits of becoming a member!  Find out more about joining the Hospitality Association here.

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