Frequently Asked Questions

The Local B&O tax is a tax levied on business activities in Oak Harbor. It functions as a tax on business gross receipts. The Oak Harbor Local B&O tax is not the same as the Washington State B&O tax. It is filed separately and in addition to other applicable federal, state, and local taxes.

The effective date of the Oak Harbor Local B&O Tax is October 1, 2025.

The initial Local B&O tax payments for the 4th quarter of 2025 and 1st quarter of 2026 will be due April 30, 2026. Thereafter, payments will be due quarterly at the end of the month following the close of the quarter. For example, the second quarter of 2026 closes on June 30, 2026 with taxes due on July 31, 2026; the third quarter of 2026 closes on September 30, 2026 with taxes due on October 31, 2026.

• March 27, 2024 City Council Workshop
• May 21, 2024 City Council Meeting: Proposed Ordinance presented and not adopted
• Discussed during the budget hearings and workshops conducted for the 2025-26 biennial budget and other Council items.
• December 18, 2024 two public workshops on Local B&O Tax held.
• January 21, 2025 City Council Meeting during discussion on potential creation of a Public Port District.
• February 25, 2025 City Council Workshop
• March 25, 2025 City Council Workshop
• May 20, 2025 City Council Meeting - Proposed Local B&O Tax Ordinance presented and continued to a future meeting.
• July 22, 2025 City Council Workshop
• August 6, 2025 City Council Meeting - Adoption of Local B&O Tax Ordinance

· Manufacturing - 0.002 (1/5 of 1%)

· Retail - 0.002 (1/5 of 1%)

· Services - 0.002 (1/5 of 1%)

· Wholesaling - 0.002 (1/5 of 1%)

· Others - 0.002 (1/5 of 1%)

Businesses with gross receipts equal to or less than $4,000,000, or is equal to or less than $1,000,000 during any quarter if on a quarterly reporting basis are exempt from the Local B&O Tax.

About 1% of Oak Harbor's businesses will be responsible for paying this tax.

· Business activity subject to the City's Utility Tax.

· Money earned from investments, unless the investments are part of a larger banking or finance business. Dividends that a company receives from its subsidiaries are also exempt.

· Insurance agents (brokers are subject to tax).

· Sale of real estate, or rental income if the lease is for 30 days or more. However, no exemption is allowed for amounts received as commissions on real estate sales.

· Funds held in trust by a mortgage broker.

· Producing or selling motor vehicle fuel.

· Producing or selling liquor.

· Casual and isolated sales, such as an accountant selling his or her office furniture.

· Accommodation sales, such as an automobile dealer selling a vehicle at cost to another dealer to fill an existing order.

· Taxes collected as trust funds, such as when a business collects sales tax from a customer to be remitted to the state.

· Nonprofit organizations, except for any retail sales they make.

· Activities subject to the City’s gambling tax.

· House of Worship daycare programs.

· Federal, state, and local government agencies.

· Professional/semi-professional/amateur sports teams operating in Oak Harbor, except for any retail sales they make.

· The above is a summary of the Local B&O Tax Exemptions. More details can be found in Ordinance No. 1998.

· Receipts from sales of tangible personal property delivered to the buyer outside of Washington.

· Receipts from sales of tangible personal property and retail services delivered to the buyer outside of Oak Harbor but within Washington.

· Cash discount taken by purchaser (deduction does not apply to extracting or manufacturing classifications).

· Credit losses (bad debts) of accrual basis taxpayers.

· State or Federal constitutional prohibitions on taxes.

· The amounts collected by professional employer services that represents that actual cost of payroll charged to a client.

· The amounts from businesses engaged in banking, loan, security, or other financial business derived from interest received on investments or loans primarily secured by first mortgages or trust deeds on non-transient residential properties.

· The above is a summary of the Local B&O Tax Deductions. More details can be found in the proposed Ordinance.

Local B&O tax registration is completed by obtaining a City of Oak Harbor business license endorsement. The city partners with the Washington State Department of Revenue for its business license application process. For details, go to https://dor.wa.gov/manage-business/city-endorsements/oak-harbor.

Upon being approved for an Oak Harbor business license, we will mail a letter to the business with the tax registration information. You should receive your tax registration letter within 30 days of being approved for a city business license.

For the initial implementation of the Local B&O Tax program, we will mail letters to all businesses with Oak Harbor business licenses.

Oak Harbor's Local B&O tax return forms are under development and will be available (with instructions) on the City's website prior to the first tax return due date. We aim to have an online form and payment option in place by that time. If filing with paper forms, returns will need to be printed and sent by mail with a check or money order.

All business must file an initial return. However, to avoid needing to file periodic returns after the initial return, businesses under the exemption threshold may file a request for active non-reporting status. If approved, the City will keep your application for active non-reporting status on file. Should you find that your business receipts exceed the tax exemption threshold, you must pay your taxes by the due date for the filing period. It will be your responsibility to reconcile your receipts to confirm they are below the exemption threshold each filing period and provide them to the City upon request. Businesses that owe taxes from prior periods will be responsible to pay back-taxes and associated late penalties.