Business & Occupation Tax

Updates & Other News

WASHINGTON STATE B&O TAX CHANGES 

What is happening? On May 20, 2025, Governor Bob Ferguson signed several bills into law. These bills introduce a variety of changes to Washington Business & Occupation (B&O) tax rates. A brief description of these changes follows:

• Senate Bill 5814, expanding the retail sales tax base to include certain services
• House Bill 2081, increasing the tax rate for multiple classifications under B&O tax
• Senate Bill 5794, repealing several B&O tax preferences

Effective October 1, 2025: 

• New B&O tax rates for Service & Other Activities:

• Specified financial institutions B&O tax rate increases from 1.2% to 1.5% (specified financial institutions are members of a consolidated financial institution group which reported at least $1 billion in net income during the previous calendar year). Must also disclose whether they are members of a consolidated financial institution group and identify all other members of their group.
• Temporary Staffing agencies must collect retail sales tax on temporary staffing services.
• Live Presentations are a retail sale now subject to retailing B&O Tax (applicable to in-person and virtual, via the internet/telecommunications equipment).
• IT, website and software development services now subject to retail sales tax.
• Digital Automated Services (DAS) exclusion for hospitals & select advanced computing.
• Investigation, security, security monitoring and armored car services subject to retail sales tax.

Effective January 1, 2026: A new 0.5% surcharge will apply to taxpayers with Washington taxable income over $250 million. This surcharge is temporary and will expire on December 31, 2029. The advanced computing surcharge will increase from 1.22% to 7.5%.

Effective January 1, 2027: The rate for retail sales will increase from 0.471% to 0.5%. The B&O rate for standard manufacturing, extracting, and wholesaling will rise from 0.484% to 0.5%.

CITY OF PORT TOWNSEND UPDATES

Effective May 28, 2025: The City is currently implementing a consolidated online filing and payment portal that will be fully integrated and linked.  At this time, mailed B&O Tax Returns should be filed as physical hard-copy returns with check, cashier's check or money order payments included.  If you wish to pay with cash or credit card, please bring your completed hard-copy return to City Hall and speak with a member of our front desk team!

BUSINESS & OCCUPATION TAX AT A GLANCE (FAQ)

Can I file and pay my tax return online?

No. Not at this time. Cash or check are currently the only acceptable forms of payment. The City is working on a consolidated tax filing and payment portal, to be released in late 2025 or early 2026. Stay tuned for more information!

Can I file my City taxes jointly with my State taxes?

No. The City’s B&O tax program is separate from Washington State's. IMPORTANT NOTE: The City of Port Townsend has a minimum filing threshold of $100,000 in gross revenue annually.  If your gross revenues from work/services performed or from goods delivered/sold inside City limits is $100,000 annually or more, you are required to file B&O tax returns with BOTH Washington State & the City of Port Townsend. If your business generated LESS than $100,000 inside City limits, then you DO NOT owe City B&O tax and you DO NOT need to file a City B&O tax return.

Please be sure to check our zoning map to determine if your location or delivery point falls inside City limits proper! City of Port Townsend Zoning Map

Can I take any deductions?

Yes. City-allowed deductions and exemptions are listed below. Review any deductions you are claiming to ensure that they fall into one of the listed categories. Refer to Port Townsend Municipal Code Section 5.04A.090  and  Port Townsend Municipal Code Section 5.04A.100 for detailed explanations.

Do I have to file B&O taxes?

State of Washington: Yes. Information on State of Washington Business & Occupation Taxes can be found here: Washington State Department of Revenue - Business & Occupation Tax

City of Port Townsend: It Depends. Any business generating at least $100,000 annually in revenue for work/services performed or for goods delivered/sold inside the City of Port Townsend is required to file a B&O tax return. Review the gross revenue amounts below relevant to your business.  As a reminder, gross revenue is the total amount of money a business makes from selling its products or services before subtracting any costs, taxes, or other expenses.

• Gross revenue over $100,000 annually: You are required to file a quarterly return.
• Gross revenue is under $100,000 annually: You do not owe any B&O tax and you do not need to file a B&O tax return.

Questions about whether or not your work was performed inside City Limits?

Refer to our zoning map here (City Limits is delineated by a bold, blue border): City of Port Townsend Zoning Map

How do I amend a previously submitted City B&O tax return?

You may submit an amended B&O tax return at any time. You may use the City's fillable B&O Tax Return form OR you may choose from one of our printable AMENDED return forms at the bottom of this web page.

• Additional tax owed? Please enclose check or money order payment for the additional tax amount and remit it with your amended return.
• Less tax is owed? You may hold credit on file towards your next quarterly or annual return or you may request a refund of the overpaid amount.

How do I change my address / phone number?

You will need to update your information with BOTH the State of Washington AND the City of Port Townsend.

• Washington State Department of Revenue - Business Licensing System: Call the BLS at (360) 705-6741
• City of Port Townsend: Email your request to: frontdesk@cityofpt.us OR Cross out any incorrect information on your B&O tax return and write in your updated address / phone number and submit your tax return to the City at: 250 Madison St, Port Townsend, WA 98368

How do I close my business?

You will need to update your information with BOTH the State of Washington AND the City of Port Townsend.

• Washington State Department of Revenue - Business Licensing System: Call (360) 705-6741 - they will need to know if you are terminating your entire business or just your City endorsement.
• City of Port Townsend: Email your request to: frontdesk@cityofpt.us OR Complete a final B&O tax return for all revenue through the closing date and enter in the date your business closed on the bottom left, then submit your tax return to the City at: 250 Madison St, Port Townsend, WA 98368

How much City B&O tax do I owe?

The amount of B&O tax owed is 0.2 of one percent of the taxable amount of gross revenue received during the reporting period. To calculate your tax owed, you would take your Gross Revenue amount (- less any applicable deductions) and multiply the result by x .002. For further information or details, please review Port Townsend Municipal Code, Section 5.04A - Business & Occupation Tax.

What do I have to do before submitting my return?

Important Things To Remember:

• Did you sign and date your return before submitting to the City?
• Any return that is missing the revenue amount, has invalid deductions, or is missing the signature will be returned.
• Did you enclose your payment with your return before submitting to the City?
• Returns filed without a payment are considered delinquent until the payment is received and may be subject to penalties if not received by the due date.

When are City B&O Tax Returns due?

City of Port Townsend B&O Taxes are only owed from businesses whose annual gross revenue (before any deductions or expenses) is $100,000 or more.

• Gross Revenue of $100,000 or more annually? You should file B&O Tax with both the State of Washington and with the City of Port Townsend QUARTERLY.
• Gross Revenue NEAR $100,000 annually? You should be filing B&O Tax with the State of Washington and you may request to be placed on an ANNUAL filing basis (so that you only pay when revenues meet or exceed the $100,000 threshold). 
• Gross Revenue Consistently Under $100,000 annually? You should be filing B&O Tax with the State of Washington, but you DO NOT need to file a City of Port Townsend tax return and you DO NOT owe any tax.

What are the Filing Periods for City B&O Taxes?

Quarterly B&O's:

• 1st Quarter - Revenue for January, February & March - Payment Due: April 30th
• 2nd Quarter - Revenue for April, May & June - Payment Due: July 31st
• 3rd Quarter - Revenue for July, August & September - Payment Due: October 31st
• 4th Quarter - Revenue for October, November & December - Payment Due: January 31st

Annual B&O's:

• Revenue for January through December - Payment Due: April 15th of the following year.

Who Should File a Return?

Regardless of revenue, every business performing work within City limits of Port Townsend MUST maintain both an active Washington State business license AND a City of Port Townsend endorsement (City endorsements are obtained through Washington State Department of Revenue's Business Licensing Service).  For more information on business licensing, please refer to our Business Licensing Page.  

Any entity whose gross annual receipts are equal to or exceed $100,000 from work/services performed or from goods sold/delivered inside City limits (as delineated by the bold blue border here: City of Port Townsend Zoning Map), is required to file a City of Port Townsend Business and Occupation tax (B&O Tax) return, in addition to filing B&O Taxes with Washington State.

Every person, firm or other organization doing business within the City limits of Port Townsend is subject to the licensing and taxation requirements set forth in Port Townsend Municipal Code, sections 5.04A, 5.04B and 5.08. We encourage you to click on the embedded links and review these sections to familiarize yourself with the requirements.  Businesses are also encouraged to consult a tax professional for any questions they may have concerning their B&O tax return.

How Do I File City B&O Taxes?

The City's B&O Tax Return forms are linked at the bottom of this page. Please click on your preferred version to open the form and follow the instructions below to complete your return. 

The City offers various tax forms to suit your needs:

• Electronically Fillable, Quarterly or Annual Filing
• Print & Hand-Complete, Quarterly or Annual Filing
• Print & Hand-Complete, Amended Quarterly or Amended Annual Filing

1. Select the appropriate Filing Frequency; Quarterly or Annual.

• Using our fillable return? If you're a Quarterly filer, please select the appropriate quarterly period from the "Quarter or N/A" dropdown.  Annual filers, please select "N/A".
• Using a printable version?  Select either Annual or Quarterly, and then hand-write the filing period information in the upper right hand corner.

2. Complete all general business information (top two sections).

3. Calculate total tax owed for each applicable business classification by completing from left to right:

• Column 2: Gross Income
• Column 3: Deduction Description or Deduction Number
  • 1. Revenue resulting from a person’s performance as an employee, as opposed to an independent contractor.
  • 2. Revenue from insurance sales, upon which a tax based on gross premiums, is paid to the State of Washington.
  • 3. Sale by a farmer or gardener of his/her own produce.
  • 4. State licensed athletic exhibitions or race meets.
  • 5. Certain gross receipts of fraternal benefit societies.
  • 6. Hospitals owned by a government body or religious corporation.
  • 7. Revenue from the sale, lease or rental (if more than 30 days) of real estate (does not include commissions).
  • 8. Certain amounts resulting from the banking, trust or savings and loan businesses.
  • 9. Sales, distribution or manufacturing of motor vehicle fuel.
  • 10. Liquor sales and distribution (includes beer and wine).
  • 11. Investment revenue for non-financial businesses.
  • 12. Bona fide initiation or membership fees, tuition, donations and contributions to endowment funds & non-profit fundraising income.
  • 13. Trade or cash discounts taken by customers.
  • 14. Bad debts incurred by accrual basis taxpayers.
  • 15. Amounts collected by taxpayers as excise taxes.
  • 16. Business transactions which federal and/or state laws and constitutions prohibit the City from taxing. Must provide documentation of proof.
• Column 4: Deduction Amount
• Column 5: Taxable Amount (Take the Gross Income from Column 2, Subtract any Deduction Amount from Column 4, input the difference in Column 5)
• Column 6: City of Port Townsend B&O Tax Rate
• Column 7: Tax Amount (Take any amounts in Column 5 "Taxable Amount" and Multiply by 0.002 to get the amount of tax owed and input the result in Column 7)
• Line A: Total All Tax Amounts for each Business Classification to get the total amount of tax owed for all of your applicable business types
• Line B: Penalty Calculation (Refer to "Delinquent Taxes and Penalties" section, below)
• Total Due: Total of Line A "TAX AMOUNT" + Line B "PENALTY" - this will be your total payment amount

4. If the business has closed, please provide the date of closing in the space provided.

5. Complete the attestation at the bottom of the form with your Name, Title and the Date you completed the form.

6. Payment Options:

• Mailing in a Payment & Return? 
  • Acceptable Payment Methods: Check, Cashier's Check or Money Order payable to: City of Port Townsend, 250 Madison St, Port Townsend, WA 98368.
• Dropping off a Return & Payment in our Outside "City Payments" Dropbox? (Dropbox is located to the right of the front doors of City Hall, embedded in the brick wall).
  • Acceptable Payment Methods: Check, Cashier's Check or Money Order payable to: City of Port Townsend
• Hand-Delivering a Return & Payment to our Cashiers at the Front Desk?
  • Acceptable Payment Methods: Cash, Check, Cashier's Check, Money Order or Credit Card

Note: You should only be submitting a return if you actually owe tax. Businesses grossing under $100,000 annually from work performed inside City limits do not owe tax and do not need to file a return!

How Often Do I File?

Quarterly Filing: All businesses with gross receipts of $100,000 or more must maintain an active State business license and City endorsement and file Quarterly B&O returns.

Annual Filing: Requires City approval. Annual filers must maintain an active State business license and City endorsement and file their return Annual B&O return by April 15th.

The City of Port Townsend follows the Washington State reporting periods, due dates and penalty assessment rates.  Refer to the table below for quarterly filing dates.

TO AVOID PENALTY, PAYMENTS MUST BE POSTMARKED OR DELIVERED BY THE DUE DATE FOR EACH FILING PERIOD.

Delinquent Tax Payments & Penalties Assessed

An account becomes delinquent when the due date for a tax return has passed and the amount due remains unpaid.