Your business activity must be included on a federal tax return. Which return and when its due will depend on your choice of entity selection. If you are a sole proprietor or a single member LLC, put it on schedule C of your individual tax return (form 1040). Otherwise, it goes on a separate tax return. If you had expenses only but no revenue, you should still complete a return to utilize the loss either this year or to create a net operating loss carry forward or carry back. Revenue Tax: Washington State imposes a tax on total revenue. Some cities impose a similar tax. These returns are due either monthly, quarterly or annually. The state (and perhaps your city) will assign a frequency based on information you put on your business license application. Getting help from a professional can save you the trouble of completing returns more frequent than needed. The tax rate depends on the type of business. Many service businesses pay a state revenue tax of 1.5% of gross sales. Sales Tax: Washington State imposes a sales tax on the retail sale of tangible goods and many services. This tax is reported on the same revenue return discussed above. Thus, it can be due monthly, quarterly or annually. The rate varies depending on your location. Other State Taxes: The State imposes other taxes on specific industries. For example, hotel/motel tax, public utilities, tobacco products, refuse collection. Consult a tax professional regarding taxes for your industry. Employment Taxes: When you hire your first employee, the government gives you a few more rolls of red tape. Both the State and the federal government impose a variety of taxes on businesses that have employees. Federal Employment Taxes: The federal government requires all employers to complete quarterly employment tax returns (form 941). These returns are usually due the last day of the month following the quarter. Form 941 tells the IRS how much income tax you withheld from employees, how much social security and medicare you withheld and the employers contribution to social security and medicare. |
