Article
Seattle city council passes payroll expense excise tax
Aug. 2, 2020 · Authored by Adam Cline, Sarah Correia
On July 6, 2020, the Seattle City Council voted 7-2 to pass Council Bill 119810, which imposes a Seattle payroll expense excise tax on large employers.
An overview of the ordinance follows.
To whom does the tax apply?
The tax is imposed quarterly on persons, which includes not-for-profit organizations or other entities, with highly paid employees, specifically:
- Persons with a Seattle annual payroll expense of at least $7 million
- Employees or independent contractors who earn $150,000 or more per year
Exclusions are provided for the following:
- Grocery businesses
- Insurance businesses
- Certain motor vehicle fuel businesses
- Liquor businesses
- Independent contractors whose compensation is included in the payroll expense of another business that’s subject to this tax
Businesses engaging temporary or contracted employees are responsible for reporting and paying the tax for such individuals, regardless of if the employees are from an employment agency.
What’s included in payroll expense?
For purposes of the tax, compensation includes:
- Salary
- Wages
- Bonuses
- Commissions
- Equity compensation
- Severance payments
- Previously accrued compensation
Pass-through entities
For owners of a pass-through entity, compensation includes guaranteed payments for services rendered, or work performed, and net distributions.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.
