Posted By PayNW December 15, 2023
If you are going to operate a business in Washington State, or more importantly, process payroll in Washington State, you need to know your way around payroll taxes and deductions.
This is a guide for Washington State payroll taxes and deductions for 2023 / 2024:
Washington State Payroll Taxes and Deductions
When processing payroll in Washington State, businesses need to ensure they understand each of the payroll taxes in the state in order to manage compliance.
Businesses should also ensure a proper understanding of hours worked in Washington State, to ensure proper compensation, and thus make proper deductions.
List of Washington State Payroll Taxes for 2023 / 2024
Washington State employers must understand the following payroll taxes for 2023 / 2024:
- Business & Occupation Tax
- Public Utility Tax
- FICA (Social Security & Medicare)
- FUTA (Unemployment)
- WA State Unemployment
- Washington Paid Family and Medical Leave
- Washington Cares
Here is a breakdown of each type of payroll tax:
Washington State Business & Occupation Tax
As opposed to a state income tax, Washington State has a Business & Occupation Tax (B&O). The state B&O Tax is a gross receipts tax, that is measured using the value of products, gross proceeds of sale, or gross income of a business.
Important to note is that there are no deductions from the B&O tax for labor, materials, taxes, or other costs of doing business. Companies that pay the State Public Utility Tax do not have to pay the B&O Tax.
Your B&O Tax rate is dependent on the tax classification of your business in Washington State.
Washington State Public Utility Tax
The Washington State Public Utility Tax is a tax only for public service businesses.
These include businesses that engage in:
- The supply of energy, natural gas, and / or water
The tax rate depends on the type of utility activity:
|Utility Tax Rate
|Public Utility Tax Rate
|Distribution of water
|Generation/distribution of electrical power
|Telegraph companies, distribution of natural gas, and collection of sewerage
|Urban transportation and watercraft vessels under 65 feet in length
|Railroads, railroad car companies, motor transportation and all other public service businesses
FICA (Social Security & Medicare)
The Federal Insurance Contributions Act (FICA) applies to two different payroll taxes, Social Security Tax and Medicare Tax.
Social Security Tax
This is a federal tax with the purpose of providing for those deemed of old age, survivors, or those on disability.
The federal social security tax rate is 6.2% for the employer and 6.2% for the employee, or 12.4% total.
This tax does have a wage base limit on what wages are taxable in a given year. For 2023, this limit was $160,200 for the year.
This is a federal tax with the purpose of to funding the Medicare health system in the United States.
The federal medicare tax rate is 1.45% for the employer and 1.45% for the employee, or 2.9% total.
Employers must also withhold and additional 0.9% toward the Medicare Tax on an individual's wages paid in excess of $200,000 in a calendar year.
FUTA (Unemployment) Tax
All employers must withhold the appropriate amount for the Federal Unemployment Tax (FUTA). The FUTA tax rate is 6.0%. It applies to the first $7,000 paid to each employee as wages during the year. This is known as the FUTA wage base.
Many states, including Washington, have their own unemployment tax as well.
Washington State Unemployment Tax
Washington State Unemployment Tax is the state unemployment tax, in addition to federal.
State unemployment taxes are paid on your employees’ gross wages up to the taxable wage base for the current year. In 2023, this was $67,600.
As for the tax rate, this is specific to each business, and is calculated using multiple factors.
The 2023 average tax rate for Washington State is 1.43%.
2023 Tax Rate for Washington Paid Family and Medical Leave
While the primary purpose of Washington Paid Family Leave is to provide paid time off to employees who experience certain medical and family scenarios that would prevent them from working, it is funded by a payroll tax.
The Washington Paid Leave 2023 premium rate is 0.8 percent of each employee’s gross wages up to the 2023 Social Security cap ($160,200).
The employer covers 27.24% of the contribution, while employee withholding covers the rest. However, employers with less than 50 employees do not need to pay the employer portion of the premium.
2023 Tax Rate for Washington Cares
The Washington Cares Fund is the latest state insurance program intended to provide long-term health care benefits. It is also funded by payroll taxes.
Employers must withhold up to $0.58 for every $100 earned (0.58% of gross earnings).
Get Help with Washington State Payroll Taxes
Payroll taxes can be complicated, and with a state like Washington that has some cutting-edge labor laws to protect employee rights, even more so.