Locum Tenens Taxes in Washington

The B&O tax is measured on the gross income of the business. Not net income. Not profit. There are no deductions for travel, malpractice insurance, licensing, retirement contributions, or any other cost of doing business. If a Washington hospital system or staffing arrangement pays your business $200,000 for services performed in Washington, the B&O base is $200,000.

Professional services, including physician services, fall under the Service and Other Activities classification. Washington restructured these rates effective October 1, 2025 into tiers based on the prior year's gross income in the classification: 1.5% when gross income is under $1 million, 1.75% from $1 million to just under $5 million, and 2.1% at $5 million or more. A solo locum practice almost always sits in the 1.5% tier; a large group or staffing entity can land higher.

Sourcing follows where the service activity happens: work performed at a Washington facility is Washington gross receipts. A 1099 locum who lives in Idaho and covers weekend shifts in Seattle is generating Washington-taxable receipts on those shifts even though the physician never becomes a Washington resident.

Washington's economic nexus rules reach a business once it has more than $100,000 of gross receipts sourced to Washington in the current or prior calendar year, and physically performing services in the state creates nexus on its own. In practice, a 1099 locum working real assignments in Washington should expect to register with the Department of Revenue through the state business licensing system and file excise tax returns through the My DOR portal (monthly, quarterly, or annually depending on assigned frequency).

There is a meaningful relief valve at the small end: businesses whose annual gross income across all B&O classifications stays under $125,000, and who owe no other DOR-administered taxes, can qualify for active non-reporting status, registered but not required to file returns. A locum who works only a short Washington stint in a year may fit here; a Washington-heavy year will not.

Washington also offers a small business B&O tax credit that shrinks as liability grows. At modest Washington revenue, the credit can reduce or even eliminate the B&O bill; at full-year locum income levels it phases out. The DOR publishes the credit tables with each return, and the My DOR system computes it automatically, one reason to file through the portal rather than guessing.

The state B&O is not the only gross-receipts tax in Washington. Several dozen cities, including Seattle, Tacoma, Bellevue, and Everett, impose their own local B&O taxes with separate registrations, their own rates, and their own filing thresholds. These are administered by the cities themselves (many through the shared FileLocal portal), not by the state Department of Revenue, so registering with the state does not cover them.

For a locum, the question is simply where the facility sits. Assignments at hospitals inside Seattle city limits can create a Seattle B&O obligation once the city's threshold is crossed; the same work in an unincorporated area or a city without a local B&O creates none. City thresholds are generally high enough that a short assignment stays under them, but a physician doing repeated or long-running work in one city should check that city's rules by name.

Entity choice in Washington is refreshingly simple because there is no state income tax to plan around. A few specifics worth knowing:

• The B&O ignores entity form. Sole proprietors, single-member LLCs, partnerships, and S-corps all pay the same B&O on the same Washington receipts. Restructuring does not reduce it.
• No PTET election exists. Pass-through entity tax elections are workarounds for state personal income taxes. Washington has none, so there is nothing to elect and no SALT-cap angle at the state level.
• The S-corp math is purely federal. The usual play, splitting income between reasonable compensation and distributions to save self-employment tax, works the same and is arguably cleanest in Washington: no state income tax return complicates payroll, and no state-level S-corp tax exists the way it does in California or Tennessee. The break-even analysis is the standard federal one.

One footnote: Washington does have a capital gains tax on large long-term capital gains above an inflation-adjusted deduction (in the high-$200,000s), which matters if you sell appreciated investments in a big year while a Washington resident. It does not apply to ordinary locum earnings, W-2 or 1099.

Illustrative example, not a specific client outcome. A Colorado-resident emergency physician earns $300,000 of 1099 income for the year, of which $120,000 comes from assignments physically worked in Washington.

One more: physicians who relocate to Washington for the tax benefit sometimes forget that becoming a Washington resident does nothing about the nonresident taxes they owe to the income-tax states they still work in. Washington residency zeroes out the home-state layer; every other state you physically work in still taxes its slice, and now there is no resident credit machinery at all because there is no home-state income tax to credit against. For travelers, residency planning and assignment-state planning are two separate levers.