Comparison: B&O Tax / Texas Franchise Tax / Margin Tax Proposal (Washington)
Summary
A comparison table of Washington's current business and occupation (B&O) tax, the Texas Franchise Tax and the Margin Tax proposal. It compares the taxes by categories including consolidated or single entity filing, conformity with federal tax definitions, whether the tax is activity-based or revenue-based, filing threshold, measure of the tax, rate structure and apportionment. The filing threshold row lists $125,000, $1 million and $500,000 in column order. For the Texas Franchise Tax, the table states that retailers and wholesalers pay a rate of 0.375%, rather than the 0.75% rate that other businesses pay.
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“Comparison: B&O Tax / Texas Franchise Tax / Margin Tax Proposal (Washington).”
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Comparison: B&O Tax / Texas Franchise Tax / Margin Tax
The table below provides a snapshot of Washington’s current business and occupation (B&O) tax as compared to the
Texas Franchise Tax and the Margin Tax proposal.
Categories Washington B&O Tax Texas Franchise Tax Margin Tax Proposal
Filing is Single entity Consolidated Consolidated
consolidated or
single entity
Conforms with No No Yes
federal tax
definitions
Tax is activity- Activity-based Revenue-based, with a Hybrid, it is mostly revenue-based
based or lower rate for retailers but includes activity-based taxes
revenue-based and wholesalers for manufacturing and extracting
activities when those activities take
place in Washington, but the sales
of those products takes place
outside of Washington
Filing threshold $125,000 $1 million $500,000
Measure of the Gross receipts (gross income Total income of the Gross receipts of the business less
tax of the business or value of business less the business’ the business’ choice of the greater
products manufactured or choice of the greater of: of:
extracted) • Cost of goods sold, • Cost of goods sold,
• Compensation paid, • Compensation paid,
• 30% of total revenue, or • 30% of total revenue, or
• $1 million. • $1 million.
Rate structure Flat rate based on activity Flat rate based on activity Flat rate based on receipts w/ EZ
and basis w/ EZ rate option for small rate option for small businesses
businesses
Lower tax rate Yes, businesses pay a rate of Yes, retailers and No, but it includes a sales tax credit
for retailers 0.471% on retailing activity, wholesalers pay a rate of which is equivalent to the benefit
rather than the 0.484% rate 0.375%, rather than the provided to retailers by the lower
for many other B&O taxable 0.75% rate that other B&O tax rate on retailing activity
activities businesses pay under the
Texas Franchise Tax
Tax base All enterprise activities All enterprise activities, All enterprise activities regardless
regardless of type of entity except for activities of type of entity (for-profit, non-
(for-profit, non-profit or performed by certain profit or municipal government)
municipal government) entities (non-profit,
municipal government, or
sole proprietors)
Taxes on Yes, where sales take place No Yes, where sales take place outside
manufacturing outside of Washington with a of Washington with a multiple
or extracting multiple activities tax credit to activities tax credit to avoid double
activities avoid double taxation taxation
Apportionment Yes, Washington’s current Yes Yes
based on single apportionment method is
factor sales essentially equivalent to
apportionment single-factor sales
Page 1 of 1 January 9, 2023
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