Washington gives you a real head start with no state income tax, but it still licenses contractors and runs strict deadlines on getting paid, so "no income tax" is not the same as "no rules." Here is what actually changes when you work here.
Each section below points to a tool that runs your exact numbers for Washington.
Tax in Washington
Washington has no state income tax, so the only income tax on your trade profit is federal. That means no state return, no state estimated payments, and no state tax to set aside. You still owe federal income tax and self-employment tax and still have to make quarterly federal estimated payments, so do not treat the state tax you are not paying as spare cash.
On sales tax in Washington, custom prime construction is taxed with retail sales tax on the full charge, labor and materials both, while subcontractors to a prime are treated as wholesale. A separate business-and-occupation (B&O) gross-receipts tax runs alongside it. Confirm it for your kind of job before you quote.
Work out what to hold back on the Tax Set-Aside Calculator, which runs the federal and self-employment numbers for Washington.
Getting paid: liens and retainage
A mechanic's lien is the tool that actually gets a Washington contractor paid, and in Washington you generally have to record it within 90 days of your last day of furnishing. There is usually an earlier notice to send first, so do not wait until the filing deadline to start. Miss it and you lose the lien, so the dates matter.
Enforcing it has its own clock. 8 months from recording. Work out your dates on the Lien Deadline tool, and if they are close, get an attorney to confirm them against the statute (RCW §§60.04.031(1), 60.04.091(1), 60.04.141).
On money held back as retainage, here is where Washington lands:
- Private work: 5% of the contract price of the work completed.
- Public work: 5% of the moneys earned by the contractor, reserved as a trust fund. 5% of the moneys earned by the subcontractor.
- Release: Private: no number of days is set at all. It falls due on acceptance of the work by the owner after you have completed it. Public: 60 days from completion of all contract work.
- Prompt pay: On private work the owner owes 1% a month interest on a late final payment, running from 30 days after acceptance. The owner has 15 days from your notice to accept the work or tell you what is left to do; if they do nothing, interest starts 30 days after that 15 days runs out.
Check the Retainage Calculator before you sign a contract that holds back more.
Free Washington retainage letters
Three letters written for Washington's rules, with the state's own release clock and its statutory citation already in them. Fill one in on screen and download it as a PDF or a Word file.
- Retainage Release Request (Washington), for when the job is done and the money has not come back
- Retainage Overdue: Demand for Payment (Washington), for when the release date has passed and nothing has arrived
- Retainage Held Above the Cap: Challenge Letter (Washington), for when more is being held than the state appears to permit
Do you need a license in Washington?
Washington does not make you sit a full contractor license, but it does require you to register with the state before you work. Registration is lighter than a licensing exam, but skipping it can cost you: in a lot of states an unregistered contractor cannot even sue to get paid. The requirement: Register with L&I from the first dollar. A casual, minor or inconsequential exemption covers one project under $500, a job at exactly $500 MUST be registered. It is handled by Washington Labor & Industries (L&I).
Trade licenses for electrical, plumbing and HVAC are usually separate and often required even where a GC license is not. See what applies to your trade on the Contractor License Checker.
Building codes and permits
Washington adopts its building codes statewide, so the rules travel with you across the state. Editions still move, so confirm yours with the building department before you price a job.
- Homes: 2021 (effective 15 March 2024 after two delays; a 2024 edition is adopted but delayed to 3 May 2027)
- Electrical: 2023, with the 2026 edition already written into the rule to take effect 31 December 2026
- Energy: 2021, split into separate residential and commercial chapters, and expressly both the maximum and the minimum a local authority may apply
- Plumbing: 2021 UPC, excluding chapters 12 and 14 and certain venting and building-sewer provisions
Washington does not run one edition across the whole job, and the energy code is where it splits: 2021, split into separate residential and commercial chapters, and expressly both the maximum and the minimum a local authority may apply. That matters more than the number itself. If you work on houses, the residential edition is your book, and the single figure quoted in most adoption charts is the commercial one.
Washington's building and plumbing codes are a mandatory statewide minimum that a city or county may amend upward, though any amendment touching residential buildings needs the Building Code Council's approval first. The energy code is stricter than that: its own text makes it both the maximum and the minimum, so a local authority may not go above it either. Electrical sits with a different agency entirely, Labor and Industries rather than the Building Code Council, and its 2026 NEC date is already fixed for 31 December 2026. The 2024 code cycle is adopted but has been pushed repeatedly and now lands on 3 May 2027, so the 2021 editions govern everything until then.
Source: WAC chapters 51-51 (residential), 51-11R and 51-11C (energy) and 51-56 (plumbing), Washington State Building Code Council under RCW 19.27, in particular RCW 19.27.040, 19.27.060 and 19.27.074; WAC chapter 296-46B (electrical), Department of Labor and Industries. Read against that source on 2026-08-25.
Check a specific job on the permit tool.
Pay and workers' comp
The minimum wage in Washington is $17.13 an hour. CPI-indexed; Seattle is higher ($20.76). Not verified against Seattle; indicative only. That is the floor for anyone you put on the books, and it is worth confirming against the state labor department each year because several states step their rate mid-year. Check a rate on the minimum-wage tool.
On workers' comp, Washington bills by the HOUR worked, not by payroll, so the payroll formula below doesn't apply. Buy directly from L&I. 2026 examples per hour: roofing $5.79, masonry $3.64, exterior painting $3.71, carpentry $2.95, plumbing $1.82, electrical $1.44. Get a range on the Workers' Comp Estimator.
If a client will not pay
If a client will not pay, you can sue for up to $10,000 in Washington's District Court, Small Claims Dept. and lawyers are not allowed, which keeps it a level playing field. That covers most unpaid-invoice disputes for a small outfit; a bigger claim goes to regular civil court where you will probably want an attorney. Walk through whether filing is worth it on the Small Claims checker.
The clock runs the other way too: a client generally has 6 years to sue you over the work under a written contract in Washington, with an absolute cutoff 6 years after the job is substantially complete. Work out your exposure on the Warranty & Claim Deadline tool.
Common questions
Does Washington have a state income tax?
No. Washington has no state income tax, so the only income tax on your trade profit is federal. You still owe federal income tax and self-employment tax and still make quarterly federal estimated payments.
Do I need a contractor's license in Washington?
Washington does not require a full license but does require you to register with the state first. The requirement: Register with L&I from the first dollar. A casual, minor or inconsequential exemption covers one project under $500, a job at exactly $500 MUST be registered. Working unregistered can stop you suing to get paid.
What is the small claims limit in Washington?
You can sue for up to $10,000 in Washington's District Court, Small Claims Dept.. The filing fee is typically $35 to $50. Larger claims go to regular civil court.
Where do I buy workers' comp in Washington?
Washington is a monopolistic state, so you buy workers' comp directly from Washington L&I. Private carriers cannot write it here.
How long do I have to file a mechanic's lien in Washington?
Generally 90 days from your last day of furnishing, and there is usually an earlier notice to send first. Miss it and you lose the lien. Work your own dates out on the Lien Deadline tool.
How much retainage can be held back in Washington?
Private: 5% of the contract price of the work completed. Public: 5% of the moneys earned by the contractor, reserved as a trust fund. Public, contractor withholding from a subcontractor: 5% of the moneys earned by the subcontractor. Run your own figure on the Retainage Calculator.
Are there free Washington contract and payment forms?
Yes. This page links 3 retainage letters written to Washington's own release clock and carrying its statutory citation. They are free, there is no sign-up, and you fill one in on screen and download it as a PDF or a Word file.
The honest bit
These are the 2026 rules for Washington as they stood when this guide was written, and they change: legislatures move thresholds, deadlines and rates every year. Treat this as general guidance to point you in the right direction, not legal, tax or financial advice. Verify anything you rely on at the source (the IRS, the Washington tax and licensing agencies, and your local building department) or with a professional. Where Washington does something unusual, the detail is called out above rather than glossed over.
Related: Tax Set-Aside Calculator · Mechanic's Lien Deadline · Contractor License Checker · Small Claims checker · Working in Your State
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Sources
- Washington contractor licensing authority · Washington contractor licensing authority. Who must hold a contractor or trade license in Washington, and the licensing instrument (RCW 18.27.090(9))
- Washington statutes (app.leg.wa.gov) · Mechanics lien notice, filing and enforcement deadlines in Washington: RCW §§60.04.031(1), 60.04.091(1), 60.04.141. Verified against this authority on 2026-08-09.
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