Seattle Amends Payroll Tax Legislation

By: Mackenzie Chase Posted: 04/19/2021

Seattle creates a new option for employers to calculate their payroll tax liability

Last week, Seattle City Council unanimously (8-0) passed legislation amending the payroll expense tax, a new tax that Seattle passed last year on employers with payrolls over $7 million. The bill, CB 120030, creates a new option for employers subject to the Seattle payroll tax to determine their payroll tax liability. The City began assessing the payroll tax in January 2021, although the first payment is not due until January 2022. 

The legislation provides a new method that would allow employers to pay taxes on the hours an employee spent working in Seattle as a proportion of the total hours the employee worked. Employers would still be allowed to use the current system in which, either an employee is classified as working in Seattle and an employer is responsible for paying taxes on all of the employee’s salary, or an employee is not classified as working in Seattle and no tax is due.

Employers will be able to select which option they will use on an annual basis, and the option will apply to all of their employees (i.e. employers cannot select the new option for some employees and the original method for others). 

Mayor Jenny Durkan signed the bill on Friday, April 16. Seattle’s Department of Finance and Administrative Services (FAS) crafted the rule to implement the payroll tax legislation and will be responsible for issuing new guidance given the legislative change. While FAS has not yet shared information on the just-passed legislation, you can find more information about the tax, including FAQs and a copy of the payroll expense tax return form on FAS’s website here. FAS has also been hosting monthly webinars to share a presentation and answer questions on the payroll tax. When the next one is scheduled, details will be available on the same webpage.