Tax question for equity daytraders in Washington state?

Discussion in 'Taxes and Accounting' started by HotTip, Oct 9, 2009.

  1. HotTip


    I currently live in CA and have considered moving to WA. The reasons are many, but one of the financial reasons is that there is no state tax. However, there is "Business and Occupation Tax Rate" potentially based on gross proceeds. Do traders have to pay this tax, and is it based on gross proceeds as reported on the broker 1099 or rather than gross profit? If I have to pay a B&O tax and it's based on gross proceeds, that could be a deal breaker.

    Thanks for any insight!
  2. HotTip


  3. I'll take a stab at it based on common sense which may not apply here since most states, counties, cities are looking for ways to "enhance" their revenue...

    I think it depends on whether you file a Schedule C form or a Schedule D form on your Federal tax return (assuming that you do file a Federal return.)

    Most folks file a Schedule D. If you do, it probably won't be a problem, but you should check anyway.

    If you file a Schedule C (you probably have elected trader status with the IRS) then you definately are operating and running a business and would be subject to tax at all levels (city, county, state, assuming if there is a tax in the first place.)

    For example: If you live in Los Angeles, the city shares information with the California Franchise Tax Board. You would not only pay state taxes, but City of Los Angeles business income taxes as well.

    Research this issue very carefully, because you don't want to get a letter like this one: (3-4-04) A.pdf

    Notice how they call it "Tax Discovery Program" :(
  4. seaker


    I live in WA and have never heard of anyone paying B&O tax on trades. Unless you apply for a business license the state wont even know your trading, we don't file any income tax forms here.