July 8, 2020
Seattle City Council approves new JumpStart payroll expense tax effective January 1, 2021
On July 6, 2020, the Seattle City Council approved an ordinance for a "JumpStart" payroll expense tax imposed on businesses operating in Seattle (with some exceptions). The tax will be used to provide services to Seattle's low-income population.
The payroll expense tax takes effect on January 1, 2021, with a sunset date of December 31, 2040. The tax rates may be adjusted beginning January 1, 2022, and on January 1 of every year thereafter.
The payroll expense tax is due and payable on a quarterly basis; however, the Director is given discretion to assign an annual reporting period to certain businesses.
Effective January 1, 2021, the following tax rates apply to businesses:
The following are exempt from the JumpStart payroll expense tax:
Ernst & Young insights
This is not the first time that Seattle has incorporated a payroll expense tax. An ordinance was passed on May 16, 2018, that would have imposed the "Employee Hours Tax," a head tax on Seattle businesses with $20 million or more in taxable gross income.
CB 119250 (signed Ordinance 125578) was a scaled-down version of the previously proposed employer payroll tax that would have imposed a yearly surcharge of $500 per employee. The final version called instead for a yearly surcharge of $275 per employee.
The Seattle Washington City Council voted to repeal the employer payroll tax scheduled to take effect on January 1, 2019. The repeal came after a coalition of Seattle businesses pledged to place a repeal referendum on the November 2018 ballot. (Reuters news article, June 12, 2018.)
EY Payroll News Flash