The State of Washington levies a tax on business activity measured by gross proceeds from sales, gross income of the business, or the value of products resulting from activities conducted within the state. This tax, known as the Business and Occupation (B&O) Tax, is imposed only on gross receipts generated within Washington State.

The major B&O tax rates are: .0471% for retailing, 0.484% for manufacturing, wholesaling and most other business, and 1.5% for selected business services. In the case of manufacturing, this means that $4.84 is collected for every $1,000 of gross sales. Businesses with gross receipts of less than $1,000 per month are exempt from B&O tax payments. Some cities also apply a B&O tax to sales made by businesses physically located within the city, and on sales to customers located in cities that have a B&O tax.

Under the B&O tax, a number of exemptions and deductions are permitted.