Washington has no personal income tax, but it has something freelancers in most states never see: the Business and Occupation (B&O) tax, a tax on your gross receipts rather than your profit. Here is what a Washington freelancer actually owes.
What you pay
| Tax | Applies? |
|---|---|
| Federal self-employment tax (15.3%) | Yes |
| Federal income tax (10%–37%) | Yes |
| State personal income tax | No |
| Washington B&O tax | Yes, on gross receipts — but small businesses often owe little or nothing |
| City B&O tax | In some cities, such as Seattle, Tacoma and Bellevue |
How the B&O tax works
The B&O tax applies to the gross income of a business — what clients pay you, with no deduction for expenses. It is owed even in a year when you lose money. Most freelance work (consulting, design, writing, software development, coaching) falls under the Service and Other Activities classification. Its rate depends on your business’s taxable income in that classification in the prior year:
| Prior-year service income | 2026 rate |
|---|---|
| Under $1 million | 1.5% |
| $1 million to under $5 million | 1.75% |
| $5 million or more | 2.1% |
So nearly every freelancer is at 1.5%. On $150,000 of service income, that is $2,250 before credits — regardless of how much of it you spent on expenses.
When small businesses owe little or nothing
- Filing threshold. If your gross income is under $125,000 a year and you don’t collect sales tax or owe other state taxes, the Department of Revenue can place your account on “active non-reporting” status, so you don’t file B&O returns.
- Small business B&O credit. Businesses with a low B&O liability get a credit that reduces or eliminates it. The credit amount is set by a table that the Department updates — check DOR’s current small business credit table for the exact figures.
Registering your business
You need a Washington business license if your gross income is $12,000 a year or more, if you hire employees, or if you collect sales tax, among other triggers. Many cities also require their own business license, and some — including Seattle — have a city B&O tax with their own thresholds.
Sales tax
Washington’s sales tax applies to goods and to a longer list of services than most states, including some digital products and services. If your work involves digital goods, website hosting, or physical products, check DOR’s guidance before assuming you don’t need to collect it.
Federal tax still applies in full
Your biggest bill is federal. A single freelancer with $85,000 of profit owes about $17,800 in federal self-employment and income tax — roughly $4,450 a quarter. Check yours with the quarterly estimated tax calculator. The B&O tax you pay is a deductible business expense on Schedule C.
How much to set aside
Use the tax set-aside calculator with the state rate at 0 for the federal part, then set aside an extra 1.5% of gross receipts if your income is above the B&O filing threshold.