Doing Business in WA & King County

Doing Business in WA & King County

Access to Capital | Incentives | Taxes | Insurance

 

Tax exemptions and credits, customized employee training, and low interest loans are just some of the incentives for doing business in the Seattle-King County area. Beyond the usual programs of federal government assistance (SBA 504 & 7a loans, Targeted Job Tax Credits, and HUD 108 Loan Guarantees), state and local governments in the area have responded with a package of incentives designed to meet the individual needs of business and industry.

King County offers an attractive tax structure for many types of businesses. Washington State currently ranks 11th highest on the Small Business Survival Index. The tax system also features a state and local property tax with annual increases subject to statutory limitations and a Business and Occupation Tax based upon gross receipts. Washington State’s tax system features:

  • No corporate income tax
  • No unitary tax
  • No inventory tax
  • No personal income tax
  • No tax on interest, dividends or capital gains
  • No sales or use tax on machinery and equipment used in manufacturing operations
  • A state and local property tax with annual increases subject to statutory limitations
  • A business and occupation (B&O) tax which is based on gross receipts

For more reasons why Washington is a great place for business, visit CHOOSE Washington.

Back To Top

ACCESS TO CAPITAL

Finding start-up capital for your new business can be difficult and time-consuming. Once you have exhausted the generosity of family and friends and you enter the “valley of death,” there is a good chance that your company will fail for lack of funding, even though your concept is a good one.

The Economic Development Council of Seattle and King County maintains close relationships with several angel investment groups in the region. We can make introductions to potential investors, and provide coaching in the preparation of your business plan and in making your pitch. It is estimated that there are more than 1,000 accredited angel investors in the Seattle metropolitan area.

The Seattle area has recently seen the arrival of several high-profile venture capital and investment banking firms, as well as the rise of large, local venture capital funds. Venture capital firms put more than $541 million into Washington start-up companies in 2011. When you are ready for large-scale investment in your company, the EDC can make introductions to the funds that are right for you, based on the type of product or service you offer and the preferences of the investors. We also maintain contact with several of the larger northern California funds.

Back To Top

INCENTIVES

Washington State Department of Revenue Tax Incentives Overview

INDUSTRIAL REVENUE BONDS

Ten public corporations in King County plus the Washington Economic Development Finance Authority issue tax-exempt Indus-trial Revenue Bonds (IRBs) on behalf of private companies. The key advantage to this type of financing is that interest payments to IRB buyers are not subject to federal income tax.  Because of this tax-exempt status, bond buyers are willing to accept lower rates of interest on the bonds, thus potentially reducing the project financing costs for your client.

STRATEGIC RESERVE FUND (SRF) GRANT

The Governor’s Strategic Reserve Fund is a discretionary tool for the purpose of creating and retaining jobs in the state. The funds can be used for workforce development, technical or planning assistance, environmental analysis, or relocation assistance. Appli-cations can be submitted via the EDC for Seattle-King County to the Department of Commerce and are then reviewed along with applications from across the state. The fund is competitive and is ultimately at the discretion of the Governor.

WORKFORCE DEVELOPMENT TRAINING

Businesses can utilize over thirty state and federal programs to assist in accessing labor market information, recruiting new em-ployees and designing customized training. The two primary programs offered at the state level are: 

  • Job Skills Program (JSP) – this program is administered through the community/technical college system and is a cost-share between the employer and the State; each pays 50% of total program cost. The employer contribution can be an in-kind match through employee-paid wages during training and use of the employer’s facility. The program is funded at approximately $2.2 million/year statewide.
  • Customized Training – this program is also administered by the community/technical college system. The program is 100%funded by the employer but 50% of the training cost can be used as a credit against the State Business & Occupation Tax.

STATE TRADE EXPANSION PROGRAM (STEP) GRANT

The STEP program may be available to support businesses in order to join in the Washington State Department of Commerce-led trade show delegations to key events around the globe, which provides tremendous opportunity to market and increase business development. 

FOREIGN TRADE ZONES

Foreign-Trade Zones (FTZs) are designated, secure sites physically located inside the borders of the United States but considered outside of U.S. Customs territory. The Port of Seattle’s Foreign Trade Zone #5 encompasses all of King County. A company can apply to designate part or all of their own facility as an FTZ. Under the Port’s Alternative Site Framework (ASF), businesses in King County engaged in importing, exporting, assembly, warehousing and distribution can apply for expedited approval through the Port’s FTZ program. Approvals are made in 30 days or less.

STATE MACHINERY AND EQUIPMENT SALES/USE TAX EXEMPTION

Pursuant to RCW 82.08.02565, manufacturing equipment (and associated research/lab equipment) purchased for a company’s new manufacturing facility is exempt from sales and use tax in Washington. 

STATE BIOTECH MANUFACTURERS DEFERRAL

Pursuant to RCW 82.76.030, the State will defer or waive sales and use taxes on investments in construction or renovation of struc-tures or machinery used for biotechnology manufacturing.  Application must be made and approved prior to starting construc-tion. This deferral is scheduled to expire January 1, 2017. 

TRANSPORTATION SUBSIDIES 

The State’s Commute Trip Reduction program allows for up to $200,000 in savings for corporations that provide commute trip reduction incentives, such as a subsidized bus pass, to their employees.  Companies are eligible for 50% of the benefit cost, up to a maximum of $60 per employee per year, which may be taken as a Business & Occupation tax credit or a public utility tax credit.

WA ECONOMIC DEVELOPMENT FINANCE AUTHORITY

The Washington Economic Development Finance Authority (WEDFA) is a public corporation of the state authorized to issue nonrecourse tax-exempt and taxable economic development revenue bonds. The Tax-Exempt Manufacturing and Processing Equipment Financing Program (TEMPE) allows bond interest to be exempt from federal income tax. This program is designed for equipment financings of $250,000 or greater.

COMMUNITY ECONOMIC REVITALIZATION BOARD

When access roads and rail lines, sewer and water extensions, or some other public improvement is needed to spur private sec-tor investments in King County, the revolving loan and grant program of the Community Economic Revitalization Board may be utilized. CERB monies are awarded to local communities on an “as needed” basis for public works projects.

COMMUNITY EMPOWERMENT ZONES

Community Empowerment Zones have been established in parts of Seattle and in White Center in King County. Firms locating in a Community Empowerment Zone, or in a county containing a Community Empowerment Zone, may qualify for the Distressed Area Sales and Use Tax Deferral/Exemption Program if at least 75% of the jobs created are filled by residents from the Community Empowerment Zone.

VENTURE CAPITAL

The Seattle area has recently seen the arrival of several high-profile venture capital and investment banking firms, as well as the rise of large, local venture capital funds. Venture capital firms put more than $929 million into Washington start-up companies in 2012.

Back To Top

TAXES

RETAIL SALES TAX

The 9.5% retail sales tax in King County is applied to most sales of personal property, retail sales, rental leases and on charges for selected services. The retail sales tax is comprised of a state tax of 6.5% and an optional local tax of 3.0%. The retail sales tax is paid by the final consumer of an item or service, and remitted to the state by the ultimate seller. Manufacturers are exempt unless a product or service is used internally during the course of their operations. Services subject to the retail sales tax include cleaning, repairing, altering or improving real property and landscaping.

The retail sales tax is not levied on the purchase of any raw materials or parts that become component parts or products manufactured for resale, nor is it levied on the purchase of any item for resale in the regular course of business. Manufacturing machinery and equipment, as well as repairs and replacement parts, are exempt from sales and use taxation. Also exempted are labor services rendered in respect to repairing, cleaning, altering or improving equipment, and machinery and equipment used in manufacturing research and development.

All interstate and foreign sales from an in-state distribution facility are exempt from state and local retail sales taxes. Retail food purchases are not subject to a sales tax and are also exempt from state and local taxes when product delivery and transfer of ownership take place across the state line.

For specific information on tax rates, contact the Washington State Department of Revenue at: http://www.dor.wa.gov or by phone at 1-800-647-7706 (within Washington); 1-800-233-6349 (out-of-state).

USE TAX

A counterpart to the retail sales tax is the use tax. The use tax applies to tangible personal property to which the retail sales tax is not applicable. Rates for the use tax and the retail sales tax are identical from county to county. A common application of the tax is the sale of an automobile between two individuals — the tax is collected from the buyer by the County Auditor when the vehicle license is transferred and remitted to the state. Use tax is measured by the current “fair market” value of the item, which may be the purchase price if the item is new or the original price less depreciation for used property.

For specific information on tax rates, contact the Washington State Department of Revenue at: http://www.dor.wa.gov or by phone at 1-800-647-7706 (within Washington); 1-800-233-6349 (out-of-state).

PROPERTY TAX

Almost all property in King County, real and personal, is subject to assessment and taxation. An important exception is the absence of a state inventory tax. Real property, which includes land, structures, and/or improvements, is evaluated for tax purposes in one of three ways: sales or assessment based on the selling price of comparable property; income or potential income if the property were developed to its highest and best use; and cost or replacement value.

The cost method is applied to manufacturing, while the income method is used primarily on commercial property. The average statewide property tax is $10.28 per $1,000 assessed value.

With the exception of port and public utility district levies, the total of regular levies (not voted on by the taxpayers) constitutionally cannot exceed one percent of the true and fair value of any taxpayer’s property. Total regular levy revenues are limited to a 6% annual increase, excluding new construction. No property tax is assessed upon intangibles such as monies, stocks, bonds and mortgages.

For specific information on tax rates, contact the King County Department of Assessments at (206) 296-7300.

BUSINESS AND OCCUPATION TAX

The State of Washington levies a tax on business activity measured by gross proceeds from sales, gross income of the business, or the value of products resulting from activities conducted within the state. This tax, known as the Business and Occupation (B&O) Tax, is imposed only on gross receipts generated within Washington State. Virtually all businesses are subject to the B&O Tax. The rates vary depending on the type of business activities, and range from .11% to 5.029%. For example, in the case of manufacturing, this means that $4.84 is collected for every $1,000 of gross sales. Businesses with gross receipts of less than $1,000 per month are exempt from B&O Tax payments. Some cities also apply a B&O Tax to sales made by businesses physically located within the city and on sales to customers located in cities that have a B&O Tax.

Under the B&O tax, a number of exemptions, deductions and deferrals are permitted, including research and development activities, agricultural production, interstate sales by retailers or wholesalers, sale or rental of real estate, credit losses and cash discounts.

For specific information on tax rates, contact the Washington State Department of Revenue at: http://www.dor.wa.gov or by phone at 1-800-647-7706 (within Washington); 1-800-233-6349 (out-of-state).

Back To Top

INSURANCE

UNEMPLOYMENT INSURANCE

All Washington State employers are required to contribute to the state’s unemployment insurance account. In 1985, Washington State adopted an experience rating system that replaced an older, flat-rate system under which all businesses paid the same rate. Now companies are charged in relation to their experience with unemployment — the lowest rates are assigned to businesses with the lowest unemployment costs. New employers enrolling in the state’s unemployment insurance program are assigned the average experience rating for their industry. Company payments are determined by applying a variable rate on all salaries up to a specific unemployment insurance ceiling.

For specific questions on unemployment insurance, contact the Washington State Employment Security Department Tax Branch at The Washington State Employment Security Department or by phone at (206) 545-6518 or (206) 455-7136.

INDUSTRIAL INSURANCE

Employers are categorized by the Department of Labor and Industries into risk classes according to the degree of hazard involved in the job. Each year new industrial insurance rates are established for the various risk categories based upon experience.

Washington is the only state with worker’s compensation tax rates based on the hours worked rather than per $100 in wages paid. This means there is not an inflationary increase built into the system when wages rise. Additionally, worker’s compensation is not paid for hours the worker is off the job including sick leave, vacation or holiday hours and leaves or absence.

Industrial insurance coverage may be provided in two ways: 1) the state fund, administered by the Department of Labor and Industries; or 2) self-insurance, whereby the employer sets up his or her own industrial insurance and safety program. Employers who meet specific requirements may qualify for self-insurance coverage. Self-insurance coverage requires proof of financial responsibility and the posting of a bond with the State Department of Labor and Industry. The minimum bond is $250,000 and the company must have net assets of at least $3.5 million and a net worth of at least $1 million. While the employer can administer and pay claims out of his or her own account, the claims are monitored by the state.

For specific questions on industrial insurance, contact the Washington State Department of Labor and Industries at http://www.lni.wa.gov/ or by phone at 1-800-423-7233.

Back To Top

Why Seattle-King County?

....It's Home of Big Ideas!

Why Seattle-King County?

How can we assist you?

The EDC provides confidential consulting services, free-of-charge, to businesses seeking to establish operations, expand, or relocate within King County.

Learn More