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Published on Monday, December 12, 2016

Recommendations from the task force on local business tax & licensing simplification

After six months of meetings and significant negotiations between city and business representatives, the task force on local business tax and licensing simplification recently adopted its recommendations and is preparing to forward them to the Legislature by the end of this month.

The good news is the task force is not recommending that all cities with a business license be required to participate in the state’s Business Licensing Service nor is it recommending any centralized collection of city B&O tax at the state level.

However, some of the items recommended by the task force represent a significant compromise on the part of cities. The four recommendations are:

  • Licensing: The state’s Business Licensing Service (BLS) will be the primary, but not exclusive, entry point for businesses to obtain general business licenses. During 2017, BLS will determine the pace at which they are able to add new city partners and determine what additional resources are needed in order to accelerate adding cities to BLS. Funds from the BLS account will be used to increase BLS staffing and provide need based grants to facilitate city participation. The goal is to have as many cities as possible voluntarily partner with BLS by December 31, 2022.
  • Local business licensing nexus: Cities, with input from business associations, will develop and adopt a mandatory model definition of engaging in business that includes a de minimis standard or occasional sales exemption. This definition will guide when a business located outside of the city can be required to obtain a business license for a fee. Cities will retain authority to register businesses below the threshold without a fee, and BLS will allow this no fee option. Cities will also retain authority to issue and charge a fee for regulatory licenses. The mandatory definition will be available and adopted within two years.
  • Allocation and apportionment of service income: A work group of cities with a B&O tax and businesses will be formed to draft changes to the apportionment of service income under RCW 35.102.130. The group will report the proposed changes to the Legislature by October 31, 2017.
  • Data sharing: The task force recommends the Legislature appropriate funding for an independent feasibility study to be conducted that will evaluate ways to create a more seamless and simplified experience for businesses to apply for a business license between BLS and the city tax and licensing portal, FileLocal. The study is to be completed by January 1, 2018.

The task force’s final report detailing these recommendations will be released late this month. In addition, cities and businesses are crafting legislation with the intent to have a bill in the 2017 legislative session that cities and business can jointly promote.  

If you would like more information about the task force recommendations and next steps, please feel free to contact AWC’s Victoria Lincoln or Serena Dolly. We have also posted more information about the task force here.

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