Washington B&O, Ohio CAT and Oregon CAT for Out-of-State Sellers

Do we owe a gross receipts tax with no office or profit in the state?

Often yes. Washington, Ohio and Oregon tax a business's receipts from the state, not its profit, and none of them needs an office there. A supplier in its loss years, or a GPU cloud billing customers in those states, can owe every year.

None of the three is an income tax, so the usual defences fail:

• No cost deduction. Washington lets no deduction for labor, materials or other costs (DOR). Ohio counts receipts "without deduction for the cost of goods sold or other expenses" (Ohio). Oregon allows only its partial subtraction.
• No Public Law 86-272. That federal shield covers only net income taxes (15 U.S.C. 381), and Oregon's law says its tax is not subject to it (ORS 317A.116).
• No treaty. The Canada–US treaty covers federal taxes, not these state taxes; see Canadian sellers with US inventory.

What makes a case harder: a group of companies (all three states look at the group), an installation crew on site, missed years, or a Canadian seller. Gather receipts by state and by customer delivery address for this year and last, your group chart, and the contracts that say whether you sell goods, install, or sell a service.

State income and franchise tax is a separate question: see business income tax in other states.

When does an out-of-state business owe Washington B&O tax?

A business organized outside Washington has nexus in a calendar year if, in that year or the year before, it had more than $100,000 of gross receipts from Washington, or physical presence there (RCW 82.04.067). It then registers through a Business License Application and gets a UBI number (DOR).

Physical presence needs only more than the slightest presence. It includes employees in the state, property there, renting out property there, and installing, constructing, repairing or maintaining property there, whether by employees or others (DOR). Servers you own in a colocation data center in Quincy are property in Washington; see servers in a data center in another state.

The trap: because the test looks back one year, nexus continues for the whole next calendar year even if Washington sales stop.

Many Washington cities also levy their own B&O tax, which the state does not collect (DOR).

Which Washington B&O tax rate applies to our sales, installation or services?

The rate depends on the classification of each receipt (DOR rate table):

The service tier took effect October 1, 2025 and turns on the prior calendar year's Washington taxable service income of the business or its affiliated group, meaning companies under more than 80% common control (DOR special notice). The rate then applies for the entire year (DOR).

Since October 1, 2025, information technology services, including data processing, are retail sales: retailing B&O plus sales tax. Web hosting is excluded from that change (DOR interim guidance). Whether GPU compute, bare-metal servers or colocation is retailing or service is decided in sales tax on colocation, hosting and GPU compute; the B&O rate follows that answer.

Service receipts are counted where the customer receives the benefit of the service (WAC 458-20-19402), not where your servers sit. Goods count where the buyer receives them.

Does the advanced computing surcharge or the large-business surcharge apply to us?

Usually not. Both reach only very large businesses.

• Advanced computing surcharge. It applies to members of an affiliated group with at least one member in advanced computing, which includes cloud computing, and worldwide group revenue over $25 billion in the prior year. Such a business pays 7.5% of its service income, capped at $75 million a year per group, and stays at the 1.5% base rate (DOR). A GPU cloud reaches it only inside such a group, for example as a subsidiary of a very large cloud or chip group.
• High-grossing surcharge. 0.5% of Washington taxable income above $250,000,000 a year, until December 31, 2029, with listed exclusions (DOR; RCW 82.04.288).

What is the Ohio CAT threshold and rate for out-of-state sellers?

An out-of-state business owes the Ohio Commercial Activity Tax only if it has bright-line presence and its Ohio taxable gross receipts pass $6 million for the year. The tax is 0.26% of receipts above that exclusion (Ohio).

Bright-line presence means any one of these during the calendar year (R.C. 5751.01(I)):

• Ohio receipts of $500,000 or more.
• Ohio property, or Ohio payroll, of $50,000 or more. Payroll includes amounts paid to others for services in Ohio on your behalf, so subcontracted crews count.
• At least 25% of total property, payroll or receipts in Ohio.
• Domicile in Ohio.

Register within 30 days after Ohio receipts pass $6 million; a late registration can cost up to $100 a month, at most $1,000. Once registered, you file every quarter, even with nothing due, until you cancel the account on the Ohio Business Gateway (Ohio).

Groups matter. Companies with a common owner holding more than 50% must register together if they have Ohio nexus, and share one exclusion. Sales between members count unless the group elects consolidated filing (Ohio CAT groups). Every member is liable for the whole group's unpaid tax, penalty and interest (R.C. 5751.014).

Two exclusions to know. Sales of your own business assets, such as used servers a GPU cloud sells, are excluded (R.C. 5751.01(F)(2)(c)). Sales of goods to a megaproject operator are excluded only while the operator has a megaproject agreement with Ohio's Tax Credit Authority and you hold a supplier certificate for that year; never assume a data center has one.

Which receipts count as Ohio or Oregon receipts?

Where a receipt is counted depends on what you sold (R.C. 5751.033; ORS 317A.128):

So a GPU cloud renting dedicated servers that sit in Hillsboro may have Oregon receipts from customers anywhere, while compute sold as a service tends to follow the customer. Neither state has published guidance classifying GPU-hours; where the amount matters, consider a ruling request before relying on either answer.

When must we register for Oregon CAT, and how does the subtraction work?

Register within 30 days of passing $750,000 of Oregon commercial activity in a year; a late registration can cost $100 a month, up to $1,000 a year. File a return when Oregon commercial activity is above $1 million. Registration is needed once, not every year (Oregon DOR).

The tax is $250 plus 0.57% of taxable commercial activity above $1 million (ORS 317A.125). Taxable commercial activity is Oregon receipts minus the subtraction (ORS 317A.119):

1. Take the greater of cost inputs (broadly, cost of goods sold) or labor costs. Labor costs leave out pay above $500,000 for any one employee.
2. Leave out costs of dealings inside your unitary group and costs tied to excluded receipts.
3. Multiply by 35%.
4. Apportion to Oregon by your Oregon share of sales.
5. The result cannot exceed 95% of your Oregon commercial activity.

A unitary group, companies with more than 50% common ownership running one integrated business, tests the thresholds together, and sales among its members are excluded. Every member is liable for the whole group's unpaid tax, penalty and interest (ORS 317A.113).

Oregon's statute lists bright-line amounts, but the department says it will not apply a bright-line nexus test. It applies the $750,000 and $1 million thresholds; being under a statutory bright-line amount does not by itself mean no tax is due.

Do contractors and installers owe these taxes, including Virginia BPOL?

Yes, and installation can create presence on its own.

• Washington. A prime contractor on a custom construction job reports retailing B&O on the full contract price and collects sales tax; a subcontractor reports wholesaling B&O (WAC 458-20-170; DOR). Out-of-state subcontractors working in Washington register once they meet a nexus test (DOR). Sales tax on materials: see installed cooling and power equipment.
• Ohio and Oregon. Installation receipts count where the site is, and on-site crews add Ohio payroll for bright-line presence. Ohio city income tax for crews: see Ohio city income tax for traveling crews.
• Virginia BPOL. Virginia's business license tax is local. A locality can tax a business with a definite place of business there (58.1-3708), which includes a location used for 30 consecutive days or more (58.1-3700.1), so a long job site can qualify. Another locality may also license a contractor whose business there exceeds $25,000 in a year (58.1-3715). The contracting rate is capped at $0.16 per $100 of gross receipts (58.1-3706). Loudoun County charges contractors $0.13 per $100 of all gross receipts once they exceed $200,000, and a flat $30 at or below that; renewal and payment are due March 1 on prior-year receipts, and out-of-county contractors pay their first year on estimated receipts (Loudoun; rates). Rates differ by county.

What about Nevada's commerce tax?

Nevada's commerce tax applies to a business whose Nevada gross revenue exceeds $4,000,000 in a July–June year. The return is due 45 days after June 30, which is August 14; at $4,000,000 or less, no return is required (Nevada notice; NRS 363C.200). The rate depends on the business category the business is primarily engaged in, designated on its first return and changed only with the department's approval. Goods count where delivered; equipment rents where it is located or used.

When are the returns and payments due, and what are the late penalties?

Can we pass the tax on to customers, and is it deductible?

Ohio bars billing the CAT as a separate charge. Washington and Oregon treat their tax as the seller's own cost. All three let you build it into your price, and the whole price stays taxable.

• Ohio: the CAT cannot be separately billed or invoiced to customers (Ohio).
• Washington: B&O is levied on the seller as part of its operating overhead, not on the customer (RCW 82.04.500; DOR).
• Oregon: you may include the CAT when setting prices, but the whole price, including that amount, is commercial activity (Oregon DOR).

On the federal return, a corporation deducts these taxes as taxes and licenses on Form 1120, line 17 (IRS); a partnership deducts them in its ordinary business income.

A Canadian corporation owes the state tax on its receipts whatever its profit. On its T2 the tax is generally a deductible expense, not a foreign tax credit; see claiming US tax on your corporate return, Canadian sellers with US inventory and Canadian corporation US tax return.

We missed past years: how do we catch up?

Each state has a voluntary disclosure program, open only if the state has not contacted you first. Washington's and Ohio's limit the look-back and waive penalties. Whether a letter already received counts as prior contact decides eligibility, so it matters before any reply.

• Washington: look-back of four years plus the current year; up to 39% of penalties waived; full interest due. A registration or enforcement contact in that window limits the benefits (DOR).
• Ohio: three-year look-back, penalties waived, tax and interest owed; once the department starts an audit or compliance contact, you no longer qualify. Refund claims have a four-year window (Ohio).
• Oregon: the CAT program is open only if you have not registered, filed or made estimated payments; the department publishes no fixed look-back or penalty terms (Oregon DOR). Without it, three years in a row with no return bring a 100% penalty (Oregon DOR).

Missed several states at once: the Multistate Tax Commission can contact the states for you (Oregon DOR).

Selling the business with tax unpaid: an Ohio buyer must hold back enough of the price to cover the seller's unpaid CAT until the department confirms payment, or becomes personally liable up to the price; an Oregon buyer is liable for the full tax and may hold back part of the price (R.C. 5751.10; ORS 317A.146).

Missed income or franchise tax returns are a separate catch-up: see catching up on unfiled business returns.

Example

Illustrative round numbers in US dollars.

Ontario cooling maker shipping to Ohio

A Canadian corporation ships $8,000,000 of coolant distribution units by carrier to a New Albany data center build. It has no Ohio office or staff. Its Ohio receipts pass $500,000, so it has bright-line presence. CAT = 0.26% × ($8,000,000 − $6,000,000) = $5,200. It registers within 30 days after Ohio receipts pass $6,000,000, after first getting a US employer identification number, then files quarterly. Had it shipped only $5,000,000, nothing would be due and no registration needed. On its T2 the $5,200 is generally a deductible expense, not a foreign tax credit.

Texas GPU cloud with Seattle customers

A Delaware C corporation losing $10,000,000 bills $3,000,000 to Seattle-area customers for services assumed to be service and other activities. It has no Washington staff or servers. That is over $100,000, so it registers. Its prior-year Washington service income was $0, so B&O = 1.5% × $3,000,000 = $45,000 for the year, despite the loss. Next year its rate is 1.75% on all its Washington service income, because this year landed between $1 million and $5 million, and nexus continues even if sales stop. At this tax level it files monthly, due the 25th.

California integrator delivering to Hillsboro

An LLC taxed as a partnership delivers $20,000,000 of GPU servers plus $1,000,000 of rack-and-stack installation to a Hillsboro colocation data center. Company-wide receipts are $100,000,000 and cost of goods sold $80,000,000; labor costs are lower.

It registers within 30 days of passing $750,000, pays quarterly estimates, and files by April 15. The same $21,000,000 delivered and installed in Quincy, Washington under a prime contract would be retailing B&O of 0.471% × $21,000,000 = $98,910, with no cost subtraction.

A Pennsylvania electrical contractor's $2,000,000 switchgear installation in Loudoun County would owe $2,600 at $0.13 per $100, filed on estimated receipts its first year.

Different for you?

• Selling hosting, colocation or GPU compute in Washington: whether it is retailing or service sets the B&O rate; see sales tax on colocation, hosting and GPU compute.
• Sales tax on servers and installation, and Washington's data center exemption: sales tax on servers, installation and maintenance. When to collect sales tax at all: when you must collect sales tax.
• Your servers sit in another state's data center: servers in a data center in another state.
• Texas: Texas franchise tax and its deductions.
• Registering with the secretary of state: registering in another state.
• A Canadian corporation: Canadian corporation US tax return; the state tax on its T2: claiming US tax on your corporate return.
• A group of companies, several states at once, or missed years: these turn on group charts, sourcing choices and disclosure timing. Bring receipts by state and delivery address, the group chart and your supply and installation contracts to our CPAs for data center tax services.

Not covered here: negotiating incentives or applying for megaproject and data center certificates, local license appeals, legal review of supply or installation contracts, and export controls.