BUSINESS AND OCCUPATION TAX
Effective July 1, 2024, the City of Poulsbo implemented a Business and Occupation (B&O) tax. This tax will apply to the gross receipts measured on the value of products, proceeds of sales, or gross income of businesses. There will be no deductions for labor, materials, or other costs of doing business.
The City of Poulsbo B&O tax is not the same as Washington state B&O tax and will be filed separately from state taxes.
As a reminder, to do business in the City of Poulsbo the following are required:
- Have an endorsed City of Poulsbo business license, issued by the state of Washington in good standing. Business Licenses are applied for through WA Department of Revenue Business License Service (BLS).
- File a Washington state excise tax return.
QUICK FACTS
· Businesses are exempt from paying the City’s B&O tax if annual gross revenue is less than $20,000, however a zero return tax form is required to be submitted annually (due January 31).
· Businesses who gross over $100,000 annually will submit B&O tax quarterly, businesses who gross under $100,000 annually will submit B&O tax annually (due January 31).
· Non-profit organizations are exempt from paying the City’s B&O tax, but are required to file an annual zero return by January 31. However, if a non-profit business has a retail location, sells merchandise, collects retail sales tax, remits tax to the state, then that income is B&O taxable.
· The tax rate for all classifications of business is .2%, (.002) and there are two thresholds for exemptions:
· Exemption 1: The first $20,000 of taxable gross revenue earned annually (or $5,000 per quarter) that is not subject to retail sales tax is exempt from the Poulsbo B&O tax via the Wholesale, Manufacturing and Services & Other classifications.
· Exemption 2: The first $125,000 of taxable gross revenue earned annually (or $31,250 per quarter) that is subject to retail sales tax is exempt from the Poulsbo B&O tax via the Retail and Retail Services classification. If you business does not remit sales tax back to the state, you cannot claim Exemption 2.
B&O TAX CLASSIFICATIONS
Retail/Retail Service – Retailing businesses sell tangible personal property at retail to the end user or operate in the activity of stalling, repairing, cleaning, altering, imprinting, improving, constructing, or decorating real or personal property for customers. Retail Service includes the sale of or charge made for personal, business, and some professional services. This classification also includes income generated from interest, rents, and other services.
Example 1: A store located on Front Street selling clothing or other items.
Example 2: Rental of tangible personal property.
Wholesaling – Wholesalers sell goods and services to businesses who resell them in the regular course of business to customers.
Example 1: A food distribution company selling produce to markets, supermarkets, and other food distributors.
Example 2: A sub-contractor working on a construction site.
Manufacturing – Manufacturing businesses produce a new, different or useful substance, or article of tangible personal property from raw materials by applying labor or mechanical services.
Example: A furniture maker obtains raw materials and cuts and assembles the wood. They affix hardware to the doors and stain the cabinets into the final product.
Service & Other (Apportioned) – This classification is for businesses that provide personal and professional services. This is also a catch-all category for businesses not subject to another B&O tax classification.
Examples: Lawyers, doctors, financial institutions, real estate brokers, accountants, janitors, and tutors.
Note: If your business operates in multiple jurisdictions, you will need to apportion and file as Service & Other Apportioned; please see PMC 3.34.070.
Tax Rate and Exemptions
The tax rate for all categories of business is .2%, (.002) and there are two thresholds for exemptions:
Exemption 1: The first $20,000 of taxable gross revenue earned annually (or $5,000 per quarter) that is not subject to retail sales tax is exempt from the Poulsbo B&O tax via the Wholesale, Manufacturing, and Services & Other classifications.
Exemption 2: The first $125,000 of taxable gross revenue earned annually (or $31,250 per quarter) that is subject to retail sales tax is exempt from the Poulsbo B&O tax via the Retail and Retail Services classification. If your business does not remit sales tax back to the state, you cannot claim Exemption 2.
Businesses will be exempt from paying the City’s B&O tax if annual gross revenue is less than $20,000. However, a B&O tax form is required to be submitted by January 31 of each year, even if there is no balance due. Non-profit organizations are exempt from paying the City’s B&O tax but are also required to file a return. However, if a non-profit business has a retail location, sells merchandise, collects retail sales tax, remits tax to the state, then that income is B&O taxable.
A full listing of exemptions may be found in Chapter 3.34 of the Poulsbo Municipal Code (PMC), linked in the Resources section below.
How to Calculate Taxes Owed
The gross revenue will determine the amount of tax to pay. To calculate this amount, multiply the taxable gross revenue amount by the tax rate, considering the applicable exemption.
Exemption #1 example: The Retail B&O tax rate is 0.002 (.2%). If the business grosses $200,000 of taxable revenue that is not subject to retail sales tax in Poulsbo during 2024, $200,000 is entered as gross revenue, then deduct the allowed exemption of $20,000 from the gross. The taxable revenue is $180,000 which is multiplied by the tax rate .002, for an annual tax liability of $360.
Exemption #2 example: Alternatively, if the business grosses $200,000 of taxable revenue that is subject to retail sales tax in Poulsbo during 2024, $200,000 is entered as gross revenue, then deduct the allowed exemption of $125,000 from the gross. The taxable revenue is $75,000, which is multiplied by the tax rate .002, for an annual tax liability of $150.
Tax Periods
| Tax Period | Dates Covered | Due Date |
|---|---|---|
| Q1 | January 1 - March 31 | April 30 |
| Q2 | April 1 - June 30 | July 31 |
| Q3 | July 1 - September 30 | October 31 |
| Q4 | October 1 - December 31 | January 31 |
| Annual | January 1 - December 31 | January 31 |
*For due dates that will fall on holidays or weekends, returns will be due on the following business day.
- $5.00 minimum penalty.
- 9% penalty on the tax liability the first overdue month.
- 19% penalty on the tax liability the second overdue month.
- 29% penalty on the tax liability the third overdue month.
MAKING A PAYMENT
Per Revised Code of Washington 82.32.080 and Poulsbo Municipal Code 3.34.130, payment must accompany the tax return to be deemed received.
FileLocal: The preferred method for filing and paying Poulsbo B&O tax. https://www.filelocal-wa.gov/
Drop Box: Drop off completed form and payment either in the drive-up drop box located on 3rd Avenue or the walk-up drop box located at the top of the stairs just outside of the main entrance to City Hall located off Moe Street. These boxes are checked daily for payments.
In Person: Pay in person at Poulsbo City Hall with the 3rd Floor Cashier during City Hall Hours: Monday – Friday (8:00am – 4:30pm), excluding holidays. Please note the front counter is closed for lunch each weekday from 12:15pm – 1:15pm.
Mail: Completed form and payment to: City of Poulsbo – Cashier, 200 NE Moe St, Poulsbo, WA 98370. Ensure it is postmarked no later than the due date to avoid penalties.
Online: www.cityofpoulsbo.com, scroll down and click Pay A City Bill, scroll down and click Other City Services Payment and when the payment portal opens, choose B and O Tax under Payment Type, enter the UBI number under Account Number or Reference and fill in the balance of information to complete the payment. Email the completed B&O tax form to: tax@cityofpoulsbo.com.
FILELOCAL
The City of Poulsbo joined FileLocal, a non-profit online filing program created and utilized by a dozen cities in Washington. FileLocal is an easy to navigate portal, where businesses can sign-up with their UBI number to create a business account and pay B&O taxes.
If your business has a current account with FileLocal, you will only need to choose Poulsbo when filing your B&O tax. If your business does not have a FileLocal account, please reference the Business User QuickStart Guide or the Tax Preparer QuickStart Guide for helpful instructions to set one up.
If your business annual gross receipts are less than $20,000, your business will be exempt from paying B&O tax, however, your business will need to submit a form, and no fee will be charged.
Online payments will be charged a $4.00 convenience fee + $1 ACH debit service fee or 2.49% credit card fee for each form. In the Making a Payment section above, a variety of options are offered to avoid the online filing fees.
Some banks require an Originator ID for electronic payments. Check with your bank and use these IDs if needed:
Originator IDs: 0000007041 and 1020401225
Note: Payments will be blocked without these IDs.
Please reach out to FileLocal Helpdesk for assistance if running into issues regarding logging in, navigating the website, creating a business account and/or tax form, and filing taxes.
- Call: (225) 215-0052 or 1 (877) 693-4435.
- Email: FileLocal@avenuinsights.com. Support hours are from 7:00am to 5:00pm Pacific Time, Monday through Friday.
Meetings
Two meetings were held regarding the B&O Tax program. The first was online and the second was in person
Links to the Meeting Recording and copy of the presentation Meeting Presentation.
Resources
- FORMS:
- PMC Chapter 3.34 provides the code language for the Poulsbo B&O tax.
- Poulsbo webpage provides information regarding the B&O tax. Please click the following link: Business and Occupation Tax | City of Poulsbo
- Alternatively, send an email to: tax@cityofpoulsbo.com for further information.
- FileLocal is the portal where businesses can create an account and pay B&O taxes. Please click the following link to access FileLocal: FileLocal-wa.gov [a Portal to e-File and Pay Business Taxes, Licenses, and Fees]
- Department of Revenue provides Washington state business licenses and endorsements for Poulsbo. Home | Washington Department of Revenue
Questions and Answers
Are gross sales generated from real estate sales B&O taxable?
Only the commission earned by the selling agent is used to calculate the tax owed.
Is rental income B&O taxable?
The fee a agent may collect for managing the properties is taxable, but rental of units for more than 30 days are exempt from B&O tax. Rental of units less than 30 days are taxable.
Are insurance premiums and interest earned from investments exempt from B&O tax?
The interest earned and insurance premiums are exempt, however the fees paid to the advisor are taxab;e.
Do I file returns quarterly, or annually?
Tax returns will be set up to file either quarterly or annually based on annual gross income generated within the city limits of Poulsbo. If a business gross is over $100,000 annually – a return will be submitted quarterly. If a business gross is under $100,000 annually – a return will be submitted annually, due January 31.
How are the Exemption amounts broken down?
Exemption 1: For businesses not collecting retail sales tax – an annual deduction of $20,000 ($5,000 per quarter).
Exemption 2: For businesses collecting retail sales tax – an annual deduction of $125,000 ($31,250 per quarter).
How do I pay tax on revenue not generated within the City of Poulsbo, with B&O taxes being paid to another jurisdiction?
RCW 35.102.130 requires the ability to allocate and apportion revenue between locations. The method uses a two-factor formula to determine how income is to be taxed and apportioned between multiple locations when engaging business in more than one jurisdiction.
When is the tax effective?
City Council passed the ordinance with an effective date of July 1, 2024.
How will the Exemption work for 2024 since it is a semi-annual year?
The deduction will be 50% for 2024. $62,500 ($31,250 per quarter) for businesses collecting retail sales tax and $10,000 ($5,000 per quarter) for businesses not collecting sales tax.
Can I file online?
Yes, businesses will be able to file through FileLocal, an online payment portal. An account can be set up now with FileLocal. If your business currently has a FileLocal account, a new account does not need to be created. FileLocal-wa.gov [a Portal to e-File and Pay Business Taxes, Licenses, and Fees]
Do I have to file online?
No, businesses will be able to file manually by completing a tax return and submitting payment with the return to Poulsbo City Hall. Options are provided above in Making a Payment.
Where do I get a City of Poulsbo business license? Can I apply through FileLocal which has a business licensing option?
City of Poulsbo business licenses will not be an option through FileLocal and must continue to be processed through the State of Washington Business License System (BLS). Home | Washington Department of Revenue
What is my Poulsbo Account Number in FileLocal?
Your Account Number will be your 9-digit UBI Number with a dash (-), the Business ID number and another dash (-) with the Business Location ID.