Washington Economy Overview

Currency

United States Dollar (USD)

Working hours

40 hours/week

Public/bank holidays

11 public holidays

Capital

Olympia

Languages

English is primary; some Spanish spoken

Population

7 million (2024)

Minimum hourly salary

$16.66 (higher in some cities)

Tax year

1st Jan – 31st Dec

Date format

MM/DD/YYYY

Misclassification penalties

Employers in Washington who misclassify employees as independent contractors may be subject to penalties, unpaid wages, tax liabilities, and legal action under both federal and state law.

Fun fact

Washington is one of only a few U.S. states with no personal income tax, making it attractive for high earners and entrepreneurs.

The State of Washington is the northwesternmost state in the lower 48 and an increasingly attractive location for business. This state has a growth economy and offers many attractive incentives to investors. If you’re interested in doing business in Washington in 2025, this review will break down the rules, regulations, and opportunities you need to know about.

Overview of Washington's Economy

At the end of 2024, the Washington State GSP (gross state product) exceeded $850 billion after showing 3% growth through the fourth quarter of the year. This ranked it as the state with the seventh-biggest economy last year. Over 632,000 businesses call Washington home and employ over 3.8 million workers. Amazon, as the largest employer in the state, employs 1.6 million Washingtonians. The current industries that are driving growth in Washington include:

Business Opportunity Reason
Aerospace Washington is home to over 1,500 aerospace and aviation companies, including global leaders such as Boeing, Airbus, Bombardier, and Embraer, solidifying the state’s position as a critical aerospace innovation and manufacturing hub.
Agriculture & Food Manufacturing Advanced, technologized agriculture on the West Coast supplies diverse crops and raw materials for thousands of food and beverage manufacturing firms, bolstering rural economies and export revenues.
Clean Technology With vast access to natural resources, Washington leads nationally in renewable energy development, particularly in biofuel, wind, solar, and tidal energy generation.
Creative Economy Over 150,000 individuals in Washington are employed in creative fields—ranging from digital media and design to fine arts and craft production—forming a dynamic and culturally influential sector.
Biosciences Seattle has emerged as a nucleus for life sciences and global health innovation, contributing significantly to biotechnology research, healthcare solutions, and employment in the bioscience sector.
Forest Products Forestry remains a cornerstone of Washington’s economic identity. Value-added forest products—including lumber, engineered wood, and paper goods—are vital to domestic construction and global exports.
Information & Communications Technology (ICT) Tech giants such as Amazon, Microsoft, and Google anchor a robust ICT sector in Seattle, with a thriving startup ecosystem and widespread innovation in cloud, e-commerce, and software development.
Maritime Washington’s strategic coastal position supports a substantial maritime industry, with advanced shipbuilding and pioneering efforts in vessel electrification driving sustainable maritime practices.
Tourism Renowned for its natural landscapes—from old-growth forests and mountain ranges to a rugged Pacific coastline—Washington is a top-tier destination for eco-tourism and cultural travel, contributing significantly to state GDP.

Taxes

Employer Tax: 7.65% – 15.8%

Social Security (FICA)

6.2% (on wages up to $168,600 for 2024)

Medicare (FICA)

1.45% (plus 0.9% on wages over $200,000)

Federal Unemployment Tax (FUTA)

Federal FUTA unemployment taxes at 6% for each employee’s first $7,000 of taxable income.

State Unemployment Insurance (SUI)

Washington’s State Unemployment Insurance (SUI) tax ranges from 0.0 to 8.15%, depending on employer delinquency.

Business and Occupation (B&O) Tax

Washington also levies a state tax on gross receipts called the Business and Occupation (B&O) tax, which is subject to several deductions. This tax is levied based on business activities as follows:

Business Activity

Retailing

Wholesaling

Manufacturing

Services and other activities

B&O Tax Rate

0.471%

0.484%

0.484%

1.5%

Employee Tax: 7.65%

Social Security

6.2%

Medicare (FICA)

1.45% 

Income tax

There is no state or local personal income tax in Washington State, but it does levy a 7.0% tax on income from capital gains. Residents also need to pay federal income tax at the following rates:

Taxable Income (USD)

Up to $11,600

$11,601 – $47,150

$47,151 – $100,525

$100,526 – $191,950

$191,951 – $243,725

$243,726 – $609,350

$609,351 and up

Progressive tax rate

10%

12%

22%

24%

32%

35%

37%

Business Regulation in Washington

If you want to set up a business in Washington State, you’ll need to obtain a business license and A unified business identifier (UBI). You’ll need to choose a business structure (corporation, partnership, limited liability partnership, or limited company) and apply through the Business Licensing Service (BLS) of the Department of Revenue (DOR). You may also need additional licenses depending on specific industry requirements or the location where you set up shop. 

Washington also has a Consumer Protection Act that protects consumers from deception and unfair business practices. Businesses can be sued for damages and legal fees and may also face fines and injunctions.

Seattle, as the state’s largest city, imposes a business license tax on all businesses and also enforces city ordinances that protect employees. These include a minimum wage of $20.76/hour, a prohibition against administrative wage theft, and a Fair Chance ordinance to prevent discrimination against applicants with criminal records. It also requires employers to provide accrual of paid sick and family leave of between one hour for every 30-40 hours worked.

What Are the Benefits of Doing Business in Washington?

More than 800 large international companies call Washington home, and the state has one of the top ten gross state products in the Union. Washington also doesn’t levy a state corporate income tax (CIT) and while it does have a gross receipts tax instead, the rates are minimal. This is a big incentive to do business in Washington state.

Washington’s workforce totals over 3.8 million workers, and the unemployment rate was a healthy 4.5% at the end of 2024, representing a balanced labor market. The state’s workforce is highly educated and possesses much sought-after technical skills.

Seattle is a major business center with a focus on the aerospace, ICT, biosciences, maritime, and logistics industries. It’s called the Jet City because of the strong presence of aviation companies there and the Emerald City for its lush and attractive greenery.

What Are the Downsides of Doing Business in Washington?

While Washington has the seventh-largest GSP in the US, it has the 13th-largest population. This disparity means that it can be hard to find qualified workers. The minimum wage in this state is also much higher than the federal minimum, especially in Seattle which enforces a minimum wage over $20. This means labor can also be very expensive for employers. This also affects the cost of living, which is quite high, especially in major centers like Seattle, Spokane, and Tacoma.

Workers’ compensation insurance is mandatory as it is in nearly all states but in Washington, the state has a monopoly on this insurance which eliminates competition and raises rates. Obtaining business permits here can be relatively complicated and costly.

Business Expansion into Washington

When you’re looking to start doing business in Washington, you have a range of options to help you set up. There are also different types of organizations that can help you find and manage your workforce efficiently.

Washington Employer of Record (EOR)

Working with an EOR is a very different route you can take to start working with workers in Washington. An EOR that is already established in Washington can hire local workers on your behalf, acting as their legal employer. It also manages all of their HR needs, from onboarding to payroll and benefits administration. This collaboration allows you to reduce your HR team’s administrative burden and ensures compliance with all local, state, and federal regulations.

Recruitment Agencies

If you need to find qualified Washingtonian workers, a recruitment agency can source candidates for you quickly. They normally also find you much more qualified workers than you could on your own, thanks to their talent pools and targeted recruiting strategies. A professional firm like Remote People can source the talent you require quickly and in full compliance with local and state employment laws.

Washington Professional Employer Organization (PEO)

If you already own a registered entity in the US, you can work with a PEO who will act as a co-employer for your workers. Like EORs, PEOs take care of HR admin, payroll, benefits, and usually taxes, managing HR for your workers compliantly in multiple states.

Subsidiary Incorporation

If you plan to directly do business in the Washington market and want to be able to hire your own employees and trade locally, incorporating a subsidiary can be a good choice. You can choose to incorporate a new limited company, corporation, or partnership, or look to acquire a local business that is already established in your industry.

Branch Registration

A faster way to start doing business in the state is to register a branch office of your existing company. Registering a branch involves obtaining a certificate of existence and a business license. This can be done online and takes approximately ten days. Your parent company will, however, take on full liability for the branch office. If you want to start exploring the market and making connections quickly, branch registration can be a viable option in the short term.

Business Opportunities in Washington

Washington State is full of opportunities for investors. Whether you’re looking to work with local workers remotely, explore the market, or set up a subsidiary for your international business, this state has what you need. It offers a highly skilled workforce, a collaborative business climate, and a growing economy that can help propel your company toward major success.

Are you about to start doing business in Washington? Remote People can help. Contact us today to assess your business needs and learn how we can assist you in achieving your objectives.