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.
Upcoming Meetings
Two meetings were scheduled for those interested in the B&O Tax program. The first was online and the second was in person.
Online B&O Outreach Meeting
* 2:30 p.m., Tuesday, September 24 *
Meeting Recording
In Person B&O Outreach Meeting
* 5:00 p.m., Thursday, September 26 *
City of Poulsbo
Council Chambers
200 NE Moe Street
Meeting Presentation
B&O TAX CLASSIFICATIONS
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.
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.
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.
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.
Tax Rate and Exemptions
In 2024, 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.
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.
Businesses will be exempt from paying the City’s B&O tax if annual gross revenue is less than $20,000. However, B&O tax filings are required, even if there is no balance due. Nonprofit organizations are exempt from paying the City’s B&O tax but are required to file a return.
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 your Taxes Owed
The business 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 2024 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
Businesses will be required to submit the tax quarterly unless they do not meet the annual gross revenue amount of $100,000. (This means for retail sales taxable earnings of $225,000 less exemption $125,000 = taxable earnings of $100,000 OR non-retail trade $120,000 less exemption $20,000 = taxable earnings of $100,000). Late returns will be subject to penalties.
| 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.
The minimum penalty is $5.00. The penalty assessed the first overdue month is 9% on the tax liability. The penalty assessed the second overdue month is 19% on the tax liability. The penalty assessed the third overdue month is 29% on the tax liability.
MAKING A PAYMENT
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 each weekday from 12:15pm – 1:15pm for lunch.
Mail: Completed form and payment may be mailed 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.
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, one can be set up mid-September, when Poulsbo goes live on the site, which will allow your business the ability to file for Poulsbo B&O tax when available.
Please reference the Business User QuickStart Guide or the Tax Preparer QuickStart Guide for helpful instructions.
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.
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 only revenue that would be considered taxable in these transactions is the fee a agent may collect for managing the properties, but rental of units for more than 30 days is exempt from B&O tax. Rental of units less than 30 days would not be exempt from the tax.
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 considered nonexempt and B&O tax would be owed.
Must I file returns quarterly? Can I file annually?
Tax returns will be set up to file either quarterly or annually. Businesses will be required to submit B&O tax quarterly, unless they do not meet the annual gross revenue amount of $100,000. (This means for retail sales taxable earnings of $225,000 less exemption $125,000 = taxable earnings of $100,000 or non-retail trade $120,000 less exemption $20,000 = taxable earnings of $100,000).
What are the exemption amounts?
Exemptions for those collecting retail sales tax will have an annual exemption of $125,000 meaning only earnings above $125,000 will be taxed at a rate of .002.
Exemptions for those not collecting retail sales tax will have an annual exemption of $20,000 meaning only earnings above $20,000 will be taxed at a rate of .002.
What if the revenue generated is not within the City of Poulsbo and B&O taxes have been 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 the effective date as July 1, 2024, allowing tax payers six (6) months to prepare. The first quarterly return will cover revenue from July 1 – September 30, 2024, with the first returns due October 31, 2024. The first annual return will cover revenue from July 1 – December 31, 2024, with the first returns due April 15, 2025.
How will the exemption work for 2024 since it is only half a year?
The exemption will be 50% for 2024. $62,500 for businesses collecting retail sales tax and $10,000 for businesses not collecting sales tax.
Can I file on-line?
Yes, businesses will be able to file through FileLocal, an online payment portal. An account can be set up now with FileLocal, however Poulsbo filing will not be available until mid-September. If your business currently has a FileLocal account, a new account does not need to be created, and you can file for Poulsbo when available. 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 Business License Number?
Your Business License Number will be your UBI Number.