Page 183 - Washington Nonprofit Handbook 2018 Edition

PART 8. WASHINGTON STATE TAXES AND NONPROFIT CORPORATIONS

CHAPTER 51. Nonprofit Organizations Are Subject to State Taxes

In Washington State, nonprofit organizations are presumed taxable in the
same manner as for-profit organizations. Therefore, if no statutory exemption or
deduction exists, a nonprofit organization must pay each of the following taxes:
(i) state and local business taxes, (ii) state and local retail sales taxes, (iii) state and
local use taxes, and (iv) real and personal property taxes.

The general presumption in favor of taxation means that while a nonprofit
organization should assume that all its business activities are taxable, it should also
determine whether an exemption or deduction applies to the specific activity or
transaction. A nonprofit organization claiming any exemption or deduction has the
burden of proof of establishing that it qualifies for the benefit or deduction.

CHAPTER 52. The State Business and Occupation Tax

a. Defined

Washington imposes the Business and Occupation tax (“B&O tax”) on the
gross receipts of every person engaged in business activities in the State. Nonprofit
organizations must pay the B&O tax based on the value of its products, the gross
proceeds of its sales, or the gross income of its services, as appropriate. Typically,
nonprofit organizations pay tax under at least two general classifications of the
B&O tax. These classifications are: (i) retailing and (ii) service and other activities.
See RCW 82.04 for the statute governing Business & Occupation Tax, and the
Department of Revenue website on business & occupations tax online at
https://dor.wa.gov/find-taxes-rates/business-occupation-tax.

(i) Retailing.

Retailing includes every sale of tangible personal property to consumers (e.g.,
sales of publications, periodicals, books and tapes). Retailing also includes certain
services such as repair or improvement of property and certain personal services.
Nonprofit organizations must pay a tax, currently at a rate of 0.471% of the
organization’s gross sales proceeds on these activities. Because the retail sales tax
uses this same definition as a starting point, sales of property or services in this
classification are also subject to the retail sales tax.

WASHINGTON NONPROFIT HANDBOOK -172- 2018