Seattle Payroll Expense Tax Filing and Requirements

The Seattle Payroll Expense Tax is a levy on the payroll of certain businesses that operate within the city. This employer-paid tax, also known as the JumpStart Seattle tax, was implemented on January 1, 2021, and is intended to provide resources for community needs and to supplement the city’s emergency and revenue stabilization funds. It is a distinct financial obligation for employers and cannot be deducted from employee compensation.

In early 2025, Seattle voters also approved an additional payroll tax, Proposition 1A, to fund social housing development. This separate tax applies a 5% rate on individual employee compensation that exceeds $1 million annually. Like the original payroll expense tax, this is paid by the employer and is retroactive to January 1, 2025. The funds generated are primarily allocated to a public development authority tasked with creating and maintaining affordable housing.

Determining if the Tax Applies to Your Business

A business is subject to the Seattle Payroll Expense Tax if it meets a two-part test. For the 2025 tax year, the first condition is having $8,837,302 or more in total Seattle payroll expense during the 2024 calendar year. If that condition is met, the second is paying at least one employee annual compensation of $189,371 or more during 2025. This means a large employer is not subject to the tax if none of its employees meet the individual compensation level for the current tax year.

The tax applies to the payroll of employees primarily assigned to a business location within the city. An employee is considered primarily assigned to Seattle if they perform more than 50% of their duties there during the calendar year. This rule includes remote employees who reside and work within Seattle, even if the company’s main office is located elsewhere.

Certain organizations are exempt from this tax, including:

• Government entities at the federal, state, and local levels.
• Businesses preempted from local taxation by other state or federal laws.
• Businesses whose primary activity is classified as a grocery business.

Calculating Your Tax Liability

To calculate the tax, a business must first identify its total “payroll expense” attributable to Seattle. This term encompasses a broad range of employee compensation, including wages, salaries, commissions, bonuses, stock options, and other forms of remuneration.

The tax features a tiered rate structure based on the business’s total annual Seattle payroll and the compensation level of individual employees. For 2025, businesses with a total Seattle payroll of less than $126,247,176 fall into Tier 1. Within this tier, they pay a tax rate of 0.746% on compensation from $189,371 to less than $504,989, and a rate of 1.811% on compensation of $504,989 or more.

Businesses with a total annual Seattle payroll from $126,247,176 to less than $1,262,471,758 are in Tier 2. For these businesses, the tax rate is 1.492% on compensation from $189,371 to less than $504,989, and the rate increases to 2.024% for compensation of $504,989 or more.

The highest tier, Tier 3, applies to businesses with total payroll of $1,262,471,758 or more, using a rate of 0.746% on compensation from $189,371 to less than $504,989 and 2.557% on compensation of $504,989 and above.

For employees who work both inside and outside of Seattle, businesses must apportion their payroll using either the “Primarily Assigned Method” or the “Hours Method.” The Hours Method allows for a calculation based on actual hours worked within the city. For example, if a Tier 1 business has an employee earning $200,000 who is primarily assigned to Seattle, the entire $200,000 is subject to the 0.746% rate.

Required Information for Filing

Before filing, a business must compile its financial data. The business’s overall annual Seattle payroll expense is needed to determine which of the three tax tiers applies. The filer will also need the total payroll expense for employees with annual compensation from $189,371 to less than $504,989, and the total for employees with compensation of $504,989 or more.

This segregated data is necessary to apply the correct tiered rates on the tax return. The official form for this obligation is the Seattle Payroll Expense Tax Return, available through the city’s designated online tax portal. The form requires the business’s identifying information, such as its customer number or Unified Business Identifier (UBI), and the selection of an apportionment method if applicable.

The Filing and Payment Process

The primary method for submission is through the city’s designated online portal, FileLocal. This system is used for filing the return and remitting the corresponding payment electronically. There may be a nominal fee associated with using the electronic filing service.

The Seattle Payroll Expense Tax is filed and paid on a quarterly basis. Late penalties for non-payment of tax due begin at 5%. The penalty increases to 15% if the tax is not paid by the last day of the month following the due date, and to 25% if it is not paid by the last day of the second month following the due date.

After a business successfully submits its return and payment through the FileLocal portal, it should receive a confirmation of the transaction. This confirmation serves as a record of a timely and complete filing. It is important to ensure that payment is sent with the tax return, as forms received without the required payment will not be considered filed if taxes are owed.