Seattle 'JumpStart' Payroll Tax Moves Forward

by Mike Nelson | Jul 14, 2021

Updated July 14, 2021:

The City of Seattle will be hosting a virtual training on how to determine tax liability and how to submit the tax. If you would like to register for their event on Wednesday, August 4 at 10am you can register here.

-----

Originally published June 17, 2021:

In early June King County Judge Mary Roberts issued her ruling and sided with the City of Seattle and against the Seattle Metropolitan Chamber of Commerce in a lawsuit trying to overturn the JumpStart payroll tax. This tax was passed in July 2020, and applies to every business in Seattle with a payroll above $7 million and at least one employee in Seattle with an annual compensation of $150,000 or more.

The Chamber of Commerce had challenged the tax in court on the grounds that it would be “illegal, invalid, and unenforceable.” In a 1952 decision by the Washington State Supreme Court in Cary v. City of Bellingham, the court ruled that it is unconstitutional for a city to levy a tax on the wages and other compensation received by city residents for services performed within the city.

Judge Roberts agreed with the City of Seattle that the payroll tax was paid by businesses and not by employees and is, therefore, not subject to the precedent set in Cary v. Bellingham.

The first tax return for the JumpStart program will be due on January 31, 2022, and will be paid quarterly thereafter. As of now, funds collected will go towards programs to spur growth coming out of the COVID-19 pandemic.

A change was made to the law in April which allows businesses a second option in determining if an employee is subject to this tax. In addition to the “primarily assigned” method from the original proposal, there is now the option to use an hourly method for employees instead.

For more information on the tax you can view the City of Seattle’s website with FAQs and sample documents here.

Mike Nelson is the WSCPA Manager of Government Affairs. You can contact him at mnelson@wscpa.org.