The Washington C-Corp's Guide to Navigating Federal & State Tax Systems
As a C-Corporation in Washington, your tax strategy must fight on two fronts. The federal government taxes your profit, while Washington State taxes your total revenue. Understanding this core difference is the key to your financial success.
The IRS cares about what you keep.
Tax Base
NET PROFIT
Tax Rate
21%
The state cares about what you make.
Tax Base
GROSS REVENUE
B&O Rate
~0.5-1.75%
Double taxation sounds scary, but it's manageable. It means profits are taxed once at the corporate level, and again if distributed to shareholders as dividends. The key is to pay owner-employees a reasonable salary, which is a deductible expense for the corporation, avoiding the first layer of tax.
This chart shows how $100,000 in corporate profit is taxed if it's all distributed as dividends. A salary would change this picture dramatically.
Your Washington B&O tax rate depends entirely on your business classification. Choosing the wrong one can more than triple your tax bill. The "Service" category is the default and most expensive; see if your business qualifies for a more favorable rate.
1. State UI Tax
Pay Unemployment Insurance taxes to the Employment Security Dept. (ESD) quarterly.
2. State Workers' Comp
Pay mandatory Workers' Comp premiums to the Dept. of Labor & Industries (L&I).
Washington's mandatory L&I policy DOES NOT include Employer's Liability Insurance. This leaves you exposed to lawsuits from injured employees. You MUST purchase separate "Stop-Gap Coverage" from a private insurer to be fully protected.
Note: State filing deadlines (B&O, UI, L&I) are typically quarterly and vary. This roadmap focuses on key federal dates.