Last updated: April 30, 2026

Starting a Business in Washington State: Licenses, Permits & Requirements (2026)

The “no state income tax” frame oversells how cheap Washington State is to operate in. Three structural taxes hit you instead, and they are higher than most first-time founders expect. First, the Business & Occupation (B&O) tax charges 0.471% to 2.1% on gross receipts – revenue, not profit, with no deduction for payroll, rent, or cost of goods sold. As of October 1, 2025, the Service & Other Activities tier jumped to 2.1% for businesses with $5 million or more in prior-year gross income (DOR special notice). Second, workers’ compensation is monopolistic – one of only four states (with Ohio, North Dakota, and Wyoming) where private workers’ comp insurance is illegal and every employer must purchase coverage through the Department of Labor & Industries (L&I) state fund. Third, the payroll-tax stack on top of UI now layers PFML at 1.13% in 2026 (up from 0.92% in 2025, ESD announcement) and WA Cares at 0.58% on employee wages, plus a Capital Gains Tax of 7% (or 9.9% on gains over $1 million) when you sell business assets.

This guide compiles the specific Washington State agency requirements, portals, fee amounts, and Seattle/King County variations that apply to starting a business in 2026. Source agencies referenced are the Washington Secretary of State, Washington Department of Revenue (DOR), Department of Labor & Industries (L&I), Employment Security Department (ESD), Department of Licensing (DOL), Department of Children, Youth, and Families (DCYF), Washington State Department of Agriculture (WSDA), and the WA Cares Fund. Note: this guide covers Washington State in the Pacific Northwest – Washington, D.C. has its own separate D.C. business guide.

Washington Business Requirements at a Glance

Requirement	Agency / Portal	Cost	Timeline
LLC Certificate of Formation	Washington Secretary of State – CCFS portal	$200 online ($180 filing + $20 processing); $180 paper	Standard: ~2 weeks paper, faster online; Expedited +$100 (3 days)
Annual Report (LLC)	Washington Secretary of State	$70/year per RCW 23.95.255	Due on LLC anniversary
UBI – Business License Application	Washington DOR	$90 (varies with city endorsements)	~10 business days
Federal EIN	IRS.gov	Free	Immediate online
B&O Tax + Retail Sales Tax registration	Washington DOR (via Business License Application)	No registration fee	Required before first sale
Unemployment Insurance (ESD)	ESD	2026 taxable wage base $78,200; new employer ~1.0% (115% of industry avg)	Register before first payroll
Paid Family & Medical Leave (PFML)	paidleave.wa.gov	2026 premium 1.13% on wages up to $184,500; employers 50+ pay ~28.57% share	Register before first payroll
WA Cares Fund (LTC premium)	wacaresfund.wa.gov	0.58% withheld from employee wages (employer remits)	Withhold from first paycheck
Workers’ Compensation (mandatory monopolistic state fund)	L&I	Premiums per L&I risk class (per worker hour)	Required before first employee starts
State minimum wage 2026	L&I	$17.13/hour state ($14.56 ages 14-15)	Effective January 1, 2026
Seattle minimum wage 2026	Seattle Office of Labor Standards	$21.30/hour (single rate – no small/large distinction)	Effective January 1, 2026
New hire reporting	DSHS Division of Child Support	Free	Within 20 days of hire (RCW 26.23.040)

How to Start a Business in Washington (Step by Step)

Step 1: Form Your Washington LLC

File a Certificate of Formation with the Washington Secretary of State through the Corporations and Charities Filing System (CCFS). Online filing is the standard path: $200 total ($180 filing fee + $20 online processing fee), and the Initial Report is included at no extra cost. Paper or mail filing is $180 but adds weeks of processing time. Expedited processing is +$100 for three business days; same-day processing in Olympia is +$150 (SOS fees page).

Your LLC name must include “LLC,” “L.L.C.,” or “Limited Liability Company” and must be distinguishable from existing entities in the SOS database. Run a name search on the CCFS portal before filing.

Registered agent: Washington requires a registered agent with a physical street address in Washington (P.O. boxes are not accepted). You can serve as your own agent if you live in Washington, or hire a third-party service.

Annual Report: Every Washington LLC must file an annual report through CCFS for $70 under RCW 23.95.255. The due date is the end of the LLC’s anniversary month. Failure to file leads to administrative dissolution, so put a calendar reminder on it.

Get your free federal EIN immediately at IRS.gov – you need it before applying for the UBI, opening a business bank account, or hiring employees.

Step 2: Get Your UBI Through the DOR Business License Application

Washington uses a Unified Business Identifier (UBI) – a nine-digit number that registers you with the DOR, ESD, L&I, and the city/county licensing endorsements you select, all in one filing. Apply through the DOR Business License Application (BLA). The state filing fee is $90; some city endorsements add fees on top (Seattle, Tacoma, and Spokane are common add-ons). Processing is roughly 10 business days. Once approved, your UBI doubles as your state tax ID, your ESD account number reference, and your business license number.

If you operate under a name different from your LLC’s legal name, register the trade name (DBA) on the same Business License Application.

Step 3: Register for the B&O Tax and Retail Sales Tax

Washington’s substitute for an income tax is the Business & Occupation tax on gross receipts. There is no deduction for payroll, rent, cost of goods sold, or any other expense – you owe B&O on every dollar of revenue, even at zero or negative profit. Rates are based on what you do, not how profitable you are.

2026 B&O classifications and rates (from the DOR B&O tax page):

• Retailing: 0.471% on gross receipts from retail sales
• Wholesaling / Manufacturing: 0.484%
• Service & Other Activities (under $1M prior year): 1.5%
• Service & Other Activities ($1M to $4,999,999.99 prior year): 1.75% (effective October 1, 2025)
• Service & Other Activities ($5M+ prior year): 2.1% (effective October 1, 2025)
• High-Grossing Surcharge (effective January 1, 2026): additional 0.5% on Washington taxable income above $250 million; expires December 31, 2029 (DOR surcharge notice)

The Small Business B&O Tax Credit reduces or eliminates B&O liability for businesses below specific monthly tax thresholds – but you still must file returns, even if zero. Filing frequency (monthly, quarterly, or annual) is assigned by DOR based on your gross income.

Retail Sales Tax

The state retail sales tax is 6.5%, with local add-ons that push the combined rate from 7.0% in some unincorporated areas up to 10.35% in Seattle and 10.6% in some King County jurisdictions. Use the DOR sales tax rate lookup tool to confirm the rate at any address.

What’s taxable matters as much as the rate. Retail sales of tangible goods are taxable. Most services historically were not – that changed October 1, 2025, when Washington expanded retail sales tax to several previously untaxed services (advertising services, IT support and training, custom website development, security services, temporary staffing, and live presentations are all examples – verify your specific service classification with DOR). Routine janitorial services (recurring commercial cleaning – dusting, floor, window, bathroom, trash) are NOT taxable under WAC 458-20-172. Specialized/non-repetitive cleaning (post-construction, flood/fire restoration, exterior walls, industrial machinery) IS taxable as a retail sale. Read the DOR service rate changes notice for the current taxable service list.

Step 4: Build Washington’s Payroll Tax Stack

Hiring employees triggers four separate Washington-specific payroll obligations on top of federal payroll taxes. Plan for the full stack from your first hire.

Unemployment Insurance (ESD)

Register with the Employment Security Department through your Business License Application. The 2026 taxable wage base is $78,200, up from $72,800 in 2025 (ESD 2026 announcement) – one of the highest UI wage bases in the country. New employers pay roughly 115% of their industry’s average rate; for many industries that lands near 1.0% but it varies (construction is much higher). After about three years of claims history, you transition to an experience-rated rate.

Paid Family & Medical Leave (PFML)

Washington’s PFML program is one of the most expansive in the country. The 2026 premium rate is 1.13% on wages up to $184,500 (the federal Social Security wage cap), a meaningful jump from 0.92% in 2024-2025. Of that 1.13%:

• Employees can be charged up to 71.43% of the premium
• Employers with 50+ employees pay the remaining ~28.57%
• Employers with fewer than 50 employees are exempt from the employer share but must still withhold and remit the employee share (unless the employer has accepted a small business assistance grant)

Note that on March 11, 2026, Governor Bob Ferguson signed Second Substitute House Bill 2345, which restructures the medical-versus-family premium accounting to align with IRS guidance. HB 2345 takes effect for 2027 – the 2026 split is unchanged. Register through paidleave.wa.gov before your first payroll.

WA Cares Fund (Long-Term Care Premium)

The WA Cares Fund is the country’s first publicly funded long-term care program. Premiums of 0.58% of gross wages are withheld from employees (employees pay; employers remit) and have been collected since July 1, 2023. Benefits begin July 1, 2026: each vested worker becomes eligible for up to $36,500 (inflation-adjusted) toward long-term care services and supports. There is no employer share – this is purely an employee-funded payroll deduction that you administer. WA Cares is unique in the country; budget the 0.58% withholding into your payroll system from day one.

Workers’ Compensation – Monopolistic L&I State Fund

Washington is one of only four monopolistic workers’ comp states (with Ohio, North Dakota, and Wyoming). Private workers’ compensation insurance is illegal in Washington. Every employer with one or more employees must purchase coverage through L&I, or qualify as a certified self-insured employer (rare – typically only large employers).

L&I premiums are calculated per worker hour rather than as a payroll percentage. Each L&I risk classification has its own base rate – construction trades and roofing run several dollars per hour, while clerical work is well under a dollar per hour. Premium structure includes the Accident Fund, Medical Aid Fund, and Stay-at-Work Fund components, with employees contributing a fraction (roughly a quarter) of the Medical Aid and Supplemental Pension portions through paycheck withholding. Penalties for operating without coverage are severe and the agency does enforce – find your industry’s risk class and rate at the L&I rates and risk classes page before you hire.

State and Local Minimum Wage

Washington’s 2026 statewide minimum wage is $17.13/hour, up 2.8% from $16.66 in 2025 and indexed annually to CPI-W under Initiative 1433 (L&I 2026 announcement). Workers ages 14-15 may be paid 85% of the rate ($14.56). The overtime-exempt salary threshold for 2026 is $80,168.40/year (2.25x the minimum wage).

Eight Washington jurisdictions exceed the state minimum: Seattle ($21.30 in 2026, with no more small/large employer split, per Seattle OLS), SeaTac, Tukwila, Renton, Bellingham, Everett, Burien, and unincorporated King County. Tacoma and Spokane currently follow the state rate. If you employ workers in any of those eight jurisdictions, you owe their local rate, not the state rate.

Report new hires to the DSHS Division of Child Support within 20 days of hire under RCW 26.23.040.

Step 5: Get Industry-Specific State and Local Licenses

Washington has no single state professional licensing department – several agencies regulate by industry:

• Department of Licensing (DOL) at dol.wa.gov – cosmetologists, barbers, estheticians, manicurists, master estheticians, hair designers, private investigators, security guards, real estate agents, notaries, and bail bond agents under various RCW chapters
• Labor & Industries (L&I) – HVAC, electrical, plumbing, and general contractor registration under RCW 18.27; construction electrician licensing under RCW 19.28
• Department of Children, Youth, and Families (DCYF) – child care licensing under WAC 110-300, replacing the former Department of Early Learning that dissolved in July 2018
• Department of Health (DOH) – food handler permits, body art licensing, and many medical professions
• Washington State Department of Agriculture (WSDA) – commercial pesticide applicator licensing under RCW 17.21 (relevant for landscaping, pest control, and agriculture)

City-level licensing applies on top of state requirements. Seattle, Tacoma, Spokane, Bellevue, Vancouver, and Bellingham all run their own license systems and add city-specific fees through the DOR’s Business Licensing Service endorsement options.

Washington’s Layered Payroll Tax Stack: What “No Income Tax” Actually Costs

The advertised advantage of Washington – “we don’t have a state income tax” – is real for personal income, but employers carry a payroll-tax stack that other states don’t have. For a typical service business with one $60,000/year employee in 2026, the Washington-specific employer-side burden looks like this:

• UI (ESD): roughly $782 (1.0% of $78,200 wage base, varies by industry experience rating)
• PFML (50+ employees): ~$194 employer share (28.57% of 1.13% on $60K)
• WA Cares: $0 employer cost (employee-only – employer remits but does not pay)
• Workers’ comp: varies dramatically by L&I risk class – low-risk office work runs a few hundred dollars per worker per year, high-risk trades can run several thousand

Plus the B&O tax of 1.5% on gross receipts under $1M (Service & Other Activities tier) – an annual cost on revenue regardless of payroll. Compared with a flat-income-tax state like Colorado (4.4% on net income with FAMLI at 0.88%), the per-employee burden in Washington is broadly comparable but the structure differs: Washington taxes you on revenue and payroll; Colorado taxes you on profit.

Washington Capital Gains Tax: The 7%/9.9% Tax Most New Founders Miss

Washington’s Capital Gains Tax took effect January 1, 2022, was sustained by the Washington Supreme Court in March 2023, and was restructured by SB 5813 effective January 1, 2025 into a tiered rate. It applies to long-term capital gains above the annual deduction threshold (approximately $278,000 in 2026, indexed annually):

• 7% on net long-term capital gains above the threshold
• 9.9% on net long-term capital gains exceeding $1 million

What’s exempt: real estate, retirement accounts (IRAs, 401(k)s), livestock, timber and timberlands, qualified family-owned small businesses (subject to limits), and other specific carve-outs. What’s not exempt: sale of stocks, bonds, mutual funds, and crucially the sale of a business itself when the gain is allocated to non-real-estate components like goodwill, intangible assets, or business inventory. If your exit plan involves selling your business in Washington for more than ~$278,000 of long-term gain, this 7% (and the 9.9% over $1M) is part of your exit math. Most first-time founders are unaware of it because they associate “no income tax” with “no tax on selling your business.”

Washington Sales Tax: From 7% Up to 10.6% Depending on Where You Sell

Washington’s combined sales tax rate is destination-based: you charge the rate at the buyer’s location, not the seller’s. The state portion is 6.5%; local rates layered on top run from 0.5% in some unincorporated areas to 4.1%+ in some King County jurisdictions. Notable rates as of 2026 (verify current rates with the DOR rate lookup):

• Seattle: ~10.35% combined (6.5% state + RTA + city)
• Bellevue / Redmond / Kirkland: ~10.3% combined
• Tacoma: ~10.3% combined
• Spokane: ~9.0% combined
• Olympia: ~9.5% combined
• Vancouver, WA: ~8.7% combined – relevant for Portland-border businesses since Oregon has no sales tax, creating cross-border shopping pressure

Service businesses face a moving target. Until October 1, 2025, most services were free of retail sales tax. The 2025 budget bill expanded retail sales tax to advertising, custom IT services, custom website development, certain security services, temporary staffing, and live presentations. Cleaning of nonresidential property is taxable; residential is not. Verify your service classification with the DOR service rate changes special notice.

Washington Market Context: Where the Demand Is

The Puget Sound corridor (Seattle-Bellevue-Tacoma) accounts for over half the state’s economic output. This concentration drives sustained small-business demand but also pushes labor costs above national norms:

• Seattle metro (King + Snohomish + Pierce): ~4 million people. Amazon, Microsoft, Boeing, Starbucks, Costco, T-Mobile, and Expedia anchor a high-income service economy. Strong demand for cleaning, childcare, food trucks, HVAC, and landscaping. Labor costs are at or near U.S. metro highs.
• Eastside (Bellevue, Redmond, Kirkland, Issaquah, Sammamish): Microsoft, Meta, Google, T-Mobile, Costco headquarters cluster. High household incomes drive demand for premium services and a high business formation rate.
• Tacoma / Pierce County: Port economy, Joint Base Lewis-McChord (military), University of Washington Tacoma campus, and a growing food and arts scene. Lower cost basis than Seattle.
• Spokane: Eastern Washington healthcare and education hub, regional airport, lower wages than west side, distinct economic geography.
• Tri-Cities (Richland, Pasco, Kennewick): Hanford nuclear cleanup contracts ($2B+/year federal spend), agriculture, wine industry. Federal contractor opportunities.
• Bellingham / Whatcom: Cross-border trade with British Columbia, Western Washington University, refining and manufacturing.
• Vancouver, WA / Clark County: Portland-adjacent. Washington businesses benefit from no state income tax for owners; Oregon residents drive across the river to shop sales-tax-free in Washington in reverse, creating retail competition pressure.
• Climate-driven HVAC and energy-services demand: The 2021 Washington State Energy Code and Climate Commitment Act drive heat pump and electrification work; the A2L refrigerant transition (R-32 / R-454B) effective January 1, 2025 reshapes the residential HVAC market.

Washington Business Guides by Industry

Every industry has its own licensing, permit, and insurance path in Washington. Pick your business type:

• How to Start a Cleaning Service in Washington – nonresidential cleaning is retail sales taxable, residential is not, L&I janitorial classes, Domestic Workers Bill of Rights
• How to Start a Food Truck in Washington – county health districts (King, Pierce, Spokane), Seattle Mobile Food Vending, WAC 246-215 commissary requirement, Food Worker Card
• How to Start a Daycare in Washington – DCYF licensing under WAC 110-300, Early Achievers ratings, Working Connections subsidy, MERIT registry
• How to Start an HVAC Business in Washington – L&I specialty contractor registration under RCW 18.27, electrical license under RCW 19.28, A2L refrigerant transition, 2021 Energy Code drives heat pump demand
• How to Start a Hair Salon in Washington – DOL Cosmetology license (1,600 hours), Master Esthetician (1,200 hours – WA-specific tier), salon shop license, booth rental rules
• How to Start a Landscaping Business in Washington – WSDA Commercial Pesticide Applicator (RCW 17.21), L&I landscape contractor registration, Washington 811 (RCW 19.122), Seattle tree protection rules
• How to Start a Private Investigation Business in Washington – DOL PI license under RCW 18.165, $10,000 surety bond, three years experience, Washington is an ALL-PARTY consent recording state under RCW 9.73.030

Key Washington Business Resources

Resource	What It Covers
Washington Secretary of State	LLC/corp formation, name searches, annual reports, CCFS portal
Department of Revenue (DOR)	UBI, B&O tax, retail sales tax, Capital Gains Tax
Department of Labor & Industries (L&I)	Workers’ comp (monopolistic state fund), contractor registration, electrical licenses, minimum wage
Employment Security Department (ESD)	Unemployment insurance, PFML
Washington PFML	Paid family and medical leave program (1.13% in 2026)
WA Cares Fund	Long-term care premium (0.58% on employee wages); benefits begin July 1, 2026
Department of Licensing (DOL)	Cosmetology, PI, real estate, security, notaries
DCYF	Child care licensing under WAC 110-300
WSDA	Commercial pesticide applicator licensing under RCW 17.21
Department of Health (DOH)	Food worker cards, body art, public health
DSHS New Hire Reporting	Report new and rehired employees within 20 days (RCW 26.23.040)
Seattle Office of Labor Standards	Seattle minimum wage, Paid Sick & Safe Time, Secure Scheduling, Fair Chance Employment

Frequently Asked Questions

How much does it cost to start an LLC in Washington State?

The Certificate of Formation filing fee is $200 online ($180 filing fee + $20 online processing fee, with the Initial Report included) or $180 by mail. Expedited processing is +$100 (3 business days) or +$150 (same-day in Olympia). After formation, the annual report through the SOS CCFS portal is $70/year per RCW 23.95.255. You’ll also need to pay the $90 DOR Business License Application fee to obtain your UBI, plus any city endorsement fees if you operate in jurisdictions like Seattle, Tacoma, or Spokane.

Does Washington really have no income tax for businesses?

Washington has no personal or corporate income tax, but it taxes business activity through three other channels: the Business & Occupation (B&O) tax on gross receipts (0.471% to 2.1% depending on classification), the retail sales tax (state 6.5% plus local), and the Capital Gains Tax (7% on long-term gains over ~$278,000 and 9.9% over $1M). For most small operating businesses, the B&O is the binding constraint – it applies to gross revenue regardless of profitability, with no deduction for expenses.

What is Washington’s B&O tax?

The Business & Occupation tax is levied on gross receipts with no expense deductions. As of October 1, 2025, the main rates are: Retailing 0.471%, Wholesaling/Manufacturing 0.484%, and Service & Other Activities tiered at 1.5% (under $1M prior-year gross), 1.75% ($1M-$5M), and 2.1% ($5M+). A new high-grossing surcharge of 0.5% applies to Washington taxable income above $250 million from January 1, 2026 through December 31, 2029. Even unprofitable businesses owe B&O on every dollar of revenue.

What is the 2026 minimum wage in Washington?

The state minimum wage rose 2.8% to $17.13/hour effective January 1, 2026 (workers ages 14-15 may be paid 85%, or $14.56). Eight cities and unincorporated King County have higher local minimums – notably Seattle at $21.30 in 2026, with no more small/large employer split as of January 1, 2026. SeaTac, Tukwila, Renton, Bellingham, Everett, Burien, and unincorporated King County also exceed the state rate. The overtime-exempt salary threshold is $80,168.40/year (2.25x minimum wage).

Why is workers’ compensation different in Washington?

Washington is one of only four monopolistic state-fund workers’ comp states (with Ohio, North Dakota, and Wyoming). Private workers’ comp insurance is illegal here – every employer with one or more employees must purchase coverage through the L&I state fund (or qualify as a certified self-insured employer, which is rare and limited to large businesses). L&I premiums are calculated per worker hour by risk classification rather than as a payroll percentage. Penalties for operating without coverage are severe and L&I actively enforces.

What is WA Cares and does my business have to pay it?

The WA Cares Fund is the country’s first publicly funded long-term care program. Premiums of 0.58% of gross wages are withheld from employee paychecks (employees pay; employers remit). There is no employer share – your obligation is administrative withholding and remittance. Premium collection began July 1, 2023; benefits become available July 1, 2026 to vested workers (up to $36,500 inflation-adjusted lifetime benefit). Most existing private long-term care insurance opt-outs closed in 2022 – new hires generally must participate.

What is Washington’s PFML and what does it cost in 2026?

Paid Family & Medical Leave (PFML) provides up to 12-18 weeks of partial wage replacement for qualifying family or medical events. The 2026 premium is 1.13% of wages up to $184,500 (the federal Social Security wage cap), an increase from 0.92% in 2024-2025. Employees can be charged up to 71.43% of the premium; employers with 50+ employees pay the remaining ~28.57%. Employers with fewer than 50 employees are exempt from the employer share but must still withhold and remit the employee share. HB 2345 (signed March 11, 2026) restructures the medical-versus-family premium accounting effective 2027 – the 2026 split is unchanged.

Do I need a separate Seattle business license?

If you have a physical location, employees, or generate $2,000+ in annual gross receipts in Seattle, you need a Seattle Business License Tax Certificate in addition to your state UBI. Seattle’s Business & Occupation tax is layered on top of the state B&O – the city has its own rates and its own classifications. Seattle also enforces separate ordinances through the Office of Labor Standards: $21.30 minimum wage in 2026, Paid Sick & Safe Time, Secure Scheduling for retail and food service, Fair Chance Employment, and Hotel Worker Protections. Tacoma, Spokane, Bellevue, Vancouver, and Bellingham also run their own license systems with city-specific endorsements added through your DOR Business License Application.