Post By Bobw
Washington State B&O tax
In 2010 we had a job which involved sourcing most of the machined parts and other stuff, and assembling a components. The majority of the cost was the machined parts, not the assembly, so relative to our gross for that year, our net was small. But the Washington State B&O tax is based off of gross income. So that put us in a situation where the B&O tax is a substantial part of our income.
Has anyone else run into this problem?
Any way to deal with it, or is that just the way it is?
You just learn to deal with it - there are a number of options for exemptions but even when you take advantage of every one - the B&O (Business and Operating) tax can take a big bite. Another area to watch is your "Use" tax which is part of the B&O return . . . we have gotten big enough to where we have to file B&O monthly and include proof of tax paid for any items that hit our depreciation list or consumables.
All part of doing business . . .
What gets me is that we have to file income tax returns for every state that we do business in - we filed returns in 17 states last year and some states have a minimum tax that are based on arcane rules that don't seem to make any sense at all. (you are filing returns for every state you do business in right?)
The BO tax is about the only tax that i know of that if you loose money you can still owe just to have the privilege of doing business in the state. Lots of people i know over there just add the BO tax on top of their price and thats how they deal with it. Im a rock throw from WA and there is no way i would leave Idaho.
I try to make sure anything that "passes through" is marked up 15%, or at the very least 10%. That's on the advice of my accountant, who says I'm losing money otherwise, on account of the effects of the B&O tax, and expense of all the bookkeeping and other record keeping ... and paying the accountant.
I hate taxes, the paperwork is just insane, and this is just for a 2 man shop.
Here's the real stimulus they need. Simplify it, 1 form and check to the feds, 1 form and check to the state. Our local stuff here is actually the easiest. We're taxed based on our federal depreciation schedule, and our $15 a year business permit.
One stupid thing we have to pay for the state, they want 4 checks, one for each quarter, but they don't want them until the end of the year, but the checks need to be dated by the quarter. So we have checks hanging off the bulletin board for damn near a year.
Why do I have to fill out forms and send a check monthly, then quarterly summarize all that crap onto another form and send it to a different address?
Here's how stupid the whole thing is. A few years back we get a letter in the mail from the IRS. In 2004 we didn't send in employee with holdings on for XXXXX. We owe 20k. Great, get on the phone, just send an amended form (a form we never had to fill out to begin with). So we get the form, fill in ALL ZERO's. Send it out. A few weeks later same thing, you owe 20k, from a different IRS office(one in Tennessee, one in Utah). File another amended form, all zero's.
Apparently zero's are hard to deal with, so we get a letter that our assets are being seized for the value of 32 cents. Math error, because they are fucking retarded and stupid. Call them up, well, that was the other office, so they made a note on our account (profile?) to fix it. They fixed it, they fixed it real good, we went from owing 20k to 32 cents to getting a $3100 refund check. All based on a form we never had to fill out to begin with.
I won't even get into the unemployment crap out here. The fricken form had 5 spaces to put a 9 digit SS# into. So get on the phone to the department of labor, the # was 1-800-IDIOT. On hold for 90 minutes, get a lady that says she can't help, and we need to call the Department of Labor.
Pleasantly remind her that she answered the phone "Department of Labor". "well then you must have called the wrong #, you needed to call 1-800-IDIOT". And then she hung up.
Much like the IRS asshole, 2 hours on hold. Get a lady that answers and then says her computer is down and can't do a damn thing. Call back. Can't transfer us, can't do shit, just call back and stay on hold til the cows come home. (and I don't have cows, and that's how long it took, eventually one cow came around, a big black bull, out front in the middle of the highway, took 1/2 hour of a Border Patrol agent and a Sheriff throwing rocks at it to get it out of the road [taxes for entertainment.. maybe] ).
Add it to your quotes, (state sticking it up my poop shoot.. 10%).
Sorry for the rant, I'm in one of "those" moods. Part of which might be, make this part, no mylar available (even from the Washington based company) no dimensioned print of course, all that is available is the microfiche. With no dimensions, and its not scaled properly. Ever get a non-dimensioned JPEG as your print????
In normal circumstances, the tax is quite low. It is just when there is a lot of gross and little net that it becomes an issue. All this work makes business harder than it already is. Can't wait to retire.
I have had years like that too.
Aside from taking all the exemptions you can, as Motion Guru suggests, there aint much you can do.
The problem is that the tax system in Washington State rely's on B&O and Sales and Property tax, as we have no state income tax.
Then we have all the exemptions from taxes the big dogs have put in place- Boeing, for example, is mysteriously exempt from all kinds of stuff, including sales tax. If I sell something in Washington, I have to collect and forward sales tax to the State. Boeing doesnt.
Tons of other wierd exemptions to sales and B&O in Washington.
Just be glad, though, that we dont have inventory tax here- I have done business in states where I did, and beyond having to pay taxes every year on stuff you paid taxes on when you bought it, which is bad enough, you also have a huge amount of paperwork keeping track of costs and taxable amounts for every machine in your shop, and every piece of scrap on the rack.
Inventory tax is why a lot of big corps toss perfectly usable materials in the dumpster- its cheaper than counting the damn stuff...
Yes, apparently it is just part of doing it in WA. The person who does our corporate didn't understand this tax very well, because we're the only manufacturing client he has ever had. All else are retail and service. Apparently, your a rare breed if you can actually make something.
Yeah, I like to joke with my customers that we are the last shop in the US that actually makes stuff.......