Business and Occupation Rates Set to Increase with Washington House Bill 2081

Change is in the air in Washington, as the Governor signed several bills on May 20, 2025, including House Bill 2081. This bill introduces new surcharges and increases to Business and Occupation (B&O) tax rates, with some hikes reaching as high as 6.28 percent. Below is a breakdown of the key changes and their effective dates:

• October 1, 2025: B&O tax rate for specified financial institutions will increase from 1.2% to 1.5%. Businesses with gross income exceeding $5 million from services and other activities will face a B&O rate increase from 1.75% to 2.10%.
• January 1, 2026: The advanced computing surcharge will jump from 1.22% to 7.5%. 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.
• January 1, 2027: The B&O rate for standard manufacturing, extracting, and wholesaling will rise from 0.484% to 0.5%. The rate for retail sales will increase from 0.471% to 0.5%.

It remains to be seen how the public will respond to these changes. While Senate Bill 5814, signed the same day, has drawn more immediate controversy, particularly for its potential violation of the federal Internet Tax Freedom Act, House Bill 2081 may also face legal challenges. The Sales Tax Institute will continue to monitor developments as they unfold. (Washington State Legislature, HB 2081, May 20, 2025)