Taxes in Washington State work differently from most of the country: there is no personal income tax and no corporate income tax, so the state funds itself mainly through sales tax, property tax, a gross-receipts business tax, and a handful of targeted excise taxes on things like capital gains, real estate sales, estates, fuel, and spirits. Your paycheck is not reduced by state income tax withholding, but you pay when you buy, own, sell, or pass on property, and businesses pay on revenue whether or not they turn a profit.
Sales and Use Tax
The retail sales tax is the tax most residents feel most often. The base state rate is 6.5%, and cities and counties stack their own rates on top. Combined, you usually pay somewhere between about 7.5% and 10.5%, with parts of the greater Seattle area at the high end.
Sales tax applies to most tangible goods: clothing, electronics, furniture, prepared food, and many digital products. Groceries bought for home consumption are generally exempt. Services tied to physical property, like construction and repair work, are taxable, while professional services such as legal or accounting work generally are not.
Use tax under RCW 82.12 fills the gap when sales tax was not collected at purchase. It comes up most often with out-of-state sellers that did not charge Washington sales tax, or when you bring a vehicle or major piece of equipment into the state. The use tax rate matches the combined sales tax rate at your location, you are responsible for self-reporting it, and if you already paid sales or use tax to another state on the same item, Washington credits that amount so you are not taxed twice.1Washington State Legislature. Chapter 82.12 RCW Use Tax The Department of Revenue tracks compliance through vehicle registration and other records.
Property Tax
Washington uses a budget-based property tax system under RCW 84.52.2Washington State Legislature. Washington Code 84.52.043 – Limitations Upon Regular Property Tax Levies Local taxing districts (counties, cities, school districts, fire districts, and others) decide how much revenue they need each year, and that total gets divided among property owners based on assessed value. Your bill depends on both your property’s value and how much your local districts are spending.
Your county assessor sets the fair market value of your land and buildings, along with any personal property used in a business. The state itself levies a separate amount to fund public schools. Combined rates vary widely by county and are subject to constitutional and statutory caps.
Bills are typically paid in two installments, with the first half due in April and the second in October. If you disagree with your assessed value, you can appeal to the county Board of Equalization within the posted deadline. Unpaid property taxes eventually lead to foreclosure, in which the county can sell the property to recover the debt.
Relief for Seniors, Disabled Homeowners, and Veterans
Homeowners who are 61 or older, disabled, or qualifying veterans may qualify for property tax exemptions or deferrals. Eligibility depends on household income and home value. Qualifying can reduce the assessed value used to calculate your tax, or let you defer payment until the home is sold or transferred. Income thresholds and deadlines are updated periodically, so check with your county assessor’s office for the current numbers.
Real Estate Excise Tax When You Sell
When real property is sold in Washington, the seller owes the Real Estate Excise Tax (REET) under RCW 82.45.3Washington State Legislature. Chapter 82.45 RCW Excise Tax on Real Estate Sales The state portion uses graduated brackets based on sale price:4Washington Department of Revenue. Real Estate Excise Tax
- $525,000 or less: 1.10%
- $525,001 to $1,525,000: 1.28%
- $1,525,001 to $3,025,000: 2.75%
- Over $3,025,000: 3.00%
The rates apply bracket by bracket, not to the entire price. On a $600,000 sale, the first $525,000 is taxed at 1.10% and only the remaining $75,000 at 1.28%. Many cities and counties add a local REET on top, so the total at closing can run higher than the state rates alone. The seller is legally responsible, though the payment is sometimes negotiated as part of the deal.
Capital Gains Excise Tax
Washington levies a 7% excise tax on the sale or exchange of long-term capital assets such as stocks, bonds, and business interests under RCW 82.87.5Washington State Legislature. Washington Code 82.87.040 – Tax Imposed Long-Term Capital Assets You only owe it on net long-term gains above a standard deduction, which was $278,000 for 2025 and is adjusted upward for inflation each year.6Washington Department of Revenue. Capital Gains Tax The 2026 deduction amount was not yet published at the time of writing; the Department of Revenue website carries the updated figure.
Several categories are exempt, including profits from selling real estate, retirement account withdrawals, and gains from certain livestock and timber. The 7% state tax applies on top of any federal capital gains tax you owe. Federal long-term rates for 2026 run from 0% to 20% depending on taxable income, so a Washington resident with large investment gains can face a combined state and federal rate approaching 27%.
Business and Occupation Tax
Every business operating in Washington owes the Business and Occupation (B&O) tax under RCW 82.04. It is a gross receipts tax, calculated on total revenue rather than profit, with no deductions for labor, materials, other taxes paid, or any other business expense.7Washington State Legislature. Chapter 82.04 RCW Business and Occupation Tax
The rate depends on the activity. Common classifications:
- Retailing: 0.471% of gross proceeds7Washington State Legislature. Chapter 82.04 RCW Business and Occupation Tax
- Wholesaling and manufacturing: 0.484% of gross proceeds
- Service and other activities: 1.5% for smaller businesses and certain entities, or 1.75% for larger ones7Washington State Legislature. Chapter 82.04 RCW Business and Occupation Tax
B&O applies to corporations, LLCs, partnerships, and sole proprietorships. Businesses must register with the Department of Revenue and file on a regular schedule, even in periods with nothing owed. Because the tax hits gross revenue, a business that breaks even or loses money still owes B&O on its receipts.
Estate Tax
Washington imposes its own estate tax under RCW 83.100, separate from the federal estate tax. The state tax applies when a deceased person’s total estate exceeds roughly $2.193 million, a threshold adjusted periodically for inflation. Graduated rates start at 10% and climb to 20% for the largest estates.
That is far more aggressive than the federal estate tax, which for 2026 applies only to estates above $15,000,000.8Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Many Washington estates owe nothing federally but still owe the state. If you own a home in an expensive market plus retirement savings and life insurance, your estate can cross the Washington threshold even when the number feels modest. Trusts, gifting strategies, and beneficiary designations can reduce or eliminate the liability.
Payroll Premiums You May See
There is no state income tax, but two state programs do take premiums out of wages. Paid Family and Medical Leave under RCW 50A provides paid time off for qualifying family and medical events, with premiums split between employers and employees and the total rate set annually by the Employment Security Department.
The WA Cares Fund under RCW 50B.04 is a long-term care insurance program funded by a premium on employee wages. Workers without an approved exemption see it deducted from their paychecks. Neither is technically an income tax, but both feel like one on a pay stub. The Employment Security Department publishes current rates, which change periodically.
Fuel and Spirits Taxes
Washington’s motor fuel tax is 49.4 cents per gallon, among the highest state fuel taxes in the country.9Washington State Department of Revenue. Motor Vehicle Fuel Tax – Tax Reference Manual Revenue is constitutionally dedicated to transportation: road construction and maintenance, bridge repairs, ferry operations, and related infrastructure.
Distilled spirits are also taxed at among the highest rates nationally. Buying liquor in Washington means paying both a per-liter tax and a percentage-based spirits sales tax calculated on the retail price, which together add a noticeable amount to the shelf price.
What to Do on Your Federal Return
If you itemize federally, consider deducting state and local sales taxes rather than income taxes on Schedule A. You can only pick one, and for most Washington residents sales tax is the obvious choice because there is no state income tax to deduct in the first place.
You can calculate the sales tax deduction from actual receipts or use the IRS’s optional sales tax tables, which estimate it from income and household size. Either way, your combined state and local tax (SALT) deduction — sales tax, property tax, and any personal property tax together — is capped. For 2026, the cap is $40,400 for most filers, with income-based phaseouts starting at $500,000 in modified adjusted gross income.8Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Anything above that produces no federal deduction.