What is the difference between a "deduction" and an "exemption"?
"Deductions" are included in the gross amount and are then "deducted" from the gross to arrive at the taxable amount. Costs of doing business are not deductible. "Exemptions" are not included in the gross amount reported in Column B of the tax return. Deductions must be itemized on the reverse side of the tax return. The following list covers the most common types of deductions (see SMC §5.45.100), and is not intended to be inclusive:
- Gross proceeds generated in another city that levies an eligible gross receipts tax comparable to the City of Seattle. Identify each city to which gross receipt taxes have been remitted. See a list of Washington cities that have a tax based on gross receipts similar to Seattle.
- Payments, advances, or reimbursements received from clients or customers that represent amounts paid on behalf of the client/customer and where the client/customer is solely liable for the cost or fees.
- Membership fees and certain service fees for non-profit youth organizations.
- Artistic and cultural organizations -- Income from business activities and value of articles manufactured for use in displaying or presenting art objects or cultural exhibitions, performance, or programs.
- Day care activities.
- Interest on investments or loans secured by mortgages or deeds of trust.
- Sales at wholesale or retail of precious metal bullion and monetized bullion.
- Amounts received as bonafide grants, endowments, and donations.
- Interstate/foreign sales (goods sent by seller to a customer outside Washington state). To qualify, the customer must not receive the goods in Washington.
- Money received as interest or from investments is not taxable. This deduction does not include service charges collected in the normal course of business and is not available to financial institutions.
- Cash discounts actually taken by customers.
- Credit losses actually sustained by taxpayers using the accrual method of accounting when reporting.
The material in this site is intended for general informational purposes only. While it is current at the time of publication, changes to the Seattle Municipal Code (SMC) or state law may invalidate some of this information. In the event of a conflict between this guide and the SMC, the SMC prevails.
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