HB 2940 is meant to level the playing field for small businesses for state business and occupation (B&O) taxes. The bill increases the minimum threshold for state B&O taxes to $125,000 for all businesses from the current thresholds of $28,000 and $46,000 for some business sectors.

In addition, beginning January 1, 2020, all businesses must calculate their eligibility for a state B&O tax credit or a tax surcharge by calculating a margin. The margin will be calculated by deducting the cost of goods sold and employee costs from either total gross income or value of products manufactured or extracted, whichever is greater. Businesses with a margin below $250,000 would qualify for a tax credit equal to the tax owed.

The bill also establishes a 12-person task force to review existing B&O tax preferences to determine if they are no longer needed and to make recommendations about improving the fairness of the state B&O tax or options for replacing it. The task force will report to the Legislature by January 1, 2022.

HB 2940 will be heard in the House Finance Committee on Tuesday, January 30 at 3:30 pm.