Tacoma B & O Tax 'Increase' on Non-Profit Health Care a Trend Worth Watching

Last week, the City of Tacoma amended its Municipal Code with Ordinance 28052.  The amendment eliminated the full exemption from B & O tax the gross income from program and service fees from certain non-profit health care providers.  This exemption had been in existence since 1950.  The increased B & O tax collection for the City of Tacoma is estimated at over $470,000 in 2012 and a total of almost $3.3 million through 2015.    

The exemption from municipal B & O tax within the City of Tacoma by any 501(c)(3) organization was amended to: “…the deduction shall apply only to 75% of the amounts derived from the provision of health care services”.   (In other words, the B & O tax for affected non-profit health care providers is on 25% of gross income)

‘Health care services’ are defined in state law, 48.44.010 RCW: ‘…means and includes medical, surgical, dental, chiropractic, hospital, optometric, podiatric, pharmaceutical, ambulance, custodial, mental health, and other therapeutic services.’ 

The effective date of the new B & O tax is April 1, 2012.  You should be able to download a tax form from Tacoma's online web portal if you are registered with them as a licensed business or citizen.

From the City of Tacoma’s web site, effective January 1, 2012:

Business and Occupation Tax Rates

Category	2002 Rate	Current Rate
Retail	0.00153	0.00153
Wholesale	0.00102	0.00102
Manufacturing	0.0011	0.0011
Service & Other	0.0042	0.0040
Service & Other, Apportioned (effective 01/01/08)		0.0040
Retail Service		0.0040
International Investment	0.00275	0.00165