In my last post I discussed how to become licensed with state and local entities. However, it is important you understand the taxes that are paid to your state and city, as well as federal government, that you will now be responsible for as a licensed business. It is always beneficial to consult a tax adviser but the next few posts will give you an overview of what to expect.
Your business will most likely be subject to federal income tax – unless you are exempt as a nonprofit. Federal income tax for businesses is based on net profit (revenue minus expenses). A sole proprietorship, partnership, most LLCs, and S-corporations tax on business income is paid by the owners through their personal tax returns – called “pass-through taxation”. You are generally required to make quarterly estimated tax payments during the tax year.
The state of Washington does not impose a corporate, unitary, or personal income tax. As a photography business, you will most likely be subject to a business and occupations (B&O) tax, a retail sales/use tax, and state property taxes. There may also be additional taxes imposed by the state (carbonated beverages, fish, timber, tobacco), which will probably not have an impact on your photography business.
In my last post I discussed registering for a state business license through the Department of Revenue. On the form that you register your business license, you will also register to pay tax – for no additional fee. You must obtain a tax registration if you answer “yes” to any of the questions listed below.
- Do you plan to gross over $12,000 per year?
- Will you be selling at retail any item or product to another person?
- Will you be repairing, installing, altering, decorating, or improving any item or product for another person?
- Will you engage in a business that is responsible for any other state taxes?
As a business operating in the county that Seattle is located, you are required to file a personal property tax affidavit. The King County Assessor’s Office is responsible for assessing personal property tax that a business uses.
City of Seattle
When operating in the city of Seattle your business is subject to the business license tax unless specifically exempted by the Seattle Municipal Code. Seattle maintains a general gross receipts business license tax and a gross receipts utility tax. Any business whose annual taxable revenue is less than $50,000 is not required to remit a tax payment although a tax return still needs to be remitted.
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