Margins Tax – vs – Business and Occupation Tax

The Washington State Tax Structure Workgroup has been meeting for several years and one of their likely proposals to the legislature is replacing the Business and Occupation Tax with a Texas style Margins Tax. While the B and O Tax has long been loathed as unfair based on gross receipts without deductions, the one saving benefit is that it is very easy to calculate and understand. A Texas style Margins Tax would likely allow deductions for costs of goods sold and/or payroll – both of which are significant in the retail industry. So, a margins tax might benefit retailers in Washington depending on what the rate is set at. While legislators on the workgroup have said the intention is to be revenue neutral and make the tax system more equitable, there will undoubtedly be winners and losers. This legislation will pit industry against other industries.

WR and its members have already met directly with the chair and lead members of the workgroup for several years. We will carefully review the draft proposal and disseminate through our membership for a careful analysis by our tax experts. Once a position is decided we will engage appropriately at the highest legislative and executive levels. A call to action potentially will be deployed if warranted.