Are you considering hiring employees in Washington State? Whether you are a business located in Washington or an out-of-state business considering hiring one or more employees here, you must be aware of the states requirements for hiring employees. Even if your business is not located in Washington and is not doing any business here, if you have a telecommuting employee who performs work here, you have certain responsibilities. And, be careful, we have an economic nexus rule in Washington which could result in Business & Occupations (B&O) Tax.
Industrial Insurance (Department of Labor & Industries)
Generally, employees of one or more employees must provide industrial insurance coverage. There are some employees and owners who are exempt; however, unless there are available exemptions, a business either must purchase insurance from the Department of Labor & Industries or, if the business has at least $25 million in assets, self-insure. The rules that govern industrial insurance can be complicated and the penalties for non-compliance are significant. Please follow this link to the business information available for the Washington State Department of Labor & Industries.
Unemployment Benefits (Employment Security Department)
Every business with employees in Washington state must register with the Employment Security Department and file unemployment insurance taxes every quarter.
Business and Occupations Tax and Sales Tax (Department of Revenue)
The B&O Tax is a tax on gross receipts for the benefit of doing business in the State of Washington. We have no income tax in Washington, so the primary revenue source for the state is the sales tax and the B&O Tax on businesses. The B&O Tax is assessed against gross revenue. Generally, this means that the tax is assessed against all invoices regardless of what is actually collected (although there is a credit for bad debt) and regardless of profitability (i.e., expenses do not matter). The B&O Tax can result in some unusual situations (for example, see my blog posting about staffing companies here). Washington has an “economic nexus” law which means that you do not need to have a physical location in Washington or employees here in order to be considered to be doing business in Washington. A business only needs to be conducting activities up to certain dollar limits (you can read about economic nexus here).
Registering Your Business in Washington
New businesses and existing businesses that expand to include employees that are subject to unemployment insurance must complete a Washington state business license application. This will establish an account with the departments of Labor & Industries, Revenue and Employment Security.
If you are a business here in Washington or considering coming to Washington, please feel free to contact me if you need assistance setting up your business here. I offer a wide range of business law services as well as assistance with the Department of Revenue or Internal Revenue Service for businesses and individuals.