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Director Fees are Subject to Washington State Business and Occupation (B&O) Tax


As a result of the 2010 Washington State tax legislation, Board of Director fees have been specifically identified as being taxable in Washington.  This legislation clarified that compensation received for serving on a corporate Board of Directors does not meet the exemption afforded to compensation earned as an employee.

Beginning July 1, 2010, all compensation earned for serving on a Board of Directors, including any expense reimbursements, stock options or bonuses is taxable under the Service classification, which is currently taxed at a rate of 1.8%.  Generally these will be the amounts reported to the director on IRS form 1099-MISC. 

Who is subject to tax?

Anyone who meets one of the following requirements is taxable in Washington:

  • A resident or domiciliary of this state
  • A non-resident of this state who meets any one of the following in the tax year:
  • More than $50,000 of property located in this state;
  • More than $50,000 of payroll paid in this state;
  • More than $250,000 of receipts received for services in this state; or
  • At least 25% of their total property, total payroll, or total receipts are in this state. 

What if I perform services in multiple states?


If Directors are taxable outside Washington on their director fees they may be able to apportion this revenue between the states.


When and how do I report to the state?


Corporate Directors are not required to register with the Washington Department of Revenue if their total gross receipts are less than $12,000 annually and no other registration requirements apply. 


If total gross receipts exceed $12,000 annually, the director will be required to register and file state excise tax returns. Washington does offer a small business tax credit which may eliminate all or a portion of the tax due.  If annual taxable Service revenues are less than $46,000 no tax should be due. 


In some instances, a corporation may be allowed to report the director fees to the Department of Revenue on behalf of the director(s). The corporation may contact the State regarding this opportunity.


What if I still have questions?

Contact Chris Laine, Director of State and Local Tax at (425) 289-7609 or   







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