AN ORDINANCE related to taxation of businesses; creating a new Chapter 5.46 of the Seattle Municipal Code; and amending sections 3.02.125, 5.30.010, 5.30.060, 5.55.010, 5.55.040, 5.55.060, 5.55.150, 5.55.165, 5.55.220, and 5.55.230 of the SeattleMunicipal Code.
WHEREAS, the State of Washington grants cities the power to license businesses for the purpose of raising revenue; and
WHEREAS, the City of Seattle has, since 1932, imposed a business license tax (also known as a business and occupation (B&O) tax or gross receipts tax) on persons engaging in business in Seattle; and
WHEREAS, in 2003, the Legislature passed HB 2030, now codified as Chapter 35.102 RCW, which changed how cities impose B&O taxes; and
WHEREAS, RCW 35.102.130, which becomes effective on January 1, 2008, requires cities to change how B&O taxes are calculated for certain types of businesses; and
WHEREAS, in 2005, at the Legislature's request, the Washington Department of Revenue completed a study of the effects of RCW 35.102.130, which estimated that the City of Seattle would lose about $15.6 million in revenue as a result of the newprovisions; and
WHEREAS, updating this estimate to reflect inflation and growth in the tax base suggests the City of Seattle will lose about $21.9 million in revenue in 2008; and
WHEREAS, RCW 35.102.1301 states that the Legislature's intent in having the Department of Revenue conduct a study was "to allow local jurisdictions to anticipate and appropriately address any potential adverse revenue impacts" from the change in statelaw; and
WHEREAS, the Mayor and City Council have reviewed multi-year forecasts of the effects of RCW 35.102.130 on the City's General Fund budget and believe the resulting revenue loss would preclude the City from proceeding with planned increases in policestaffing, improvements in transportation infrastructure, and support for the 10-Year Plan to End Homelessness; and
WHEREAS, other Washington cities use different forms and combinations of business taxation, including taxes measured by the space used by businesses; and
WHEREAS, in imposing a new complementary tax under this ordinance, the Mayor and City Council seek to ensure that no business will pay more total tax than it would have under existing law; NOW, THEREFORE,
BE IT ORDAINED BY THE CITY OF SEATTLE AS FOLLOWS:
Section 1. Effective January 1, 2008, a new Chapter 5.46, "Square Footage Tax," is added to Title 5 of the Seattle Municipal Code as follows:
5.46.010 Administrative Provisions.
All of the provisions contained in Chapter 5.55 of the Seattle Municipal Code shall have full force and application with respect to taxes imposed under the provisions of this chapter except as may be expressly stated to the contrary herein.
5.46.020 Definitions.
The definitions contained in Chapter 5.30 of the Seattle Municipal Code shall be fully applicable to this chapter except as may be expressly stated to the contrary herein. The following additional definitions shall apply throughout this Chapter:
A. "Business floor space" means rentable square feet of an office or place of business and includes the proportionate share of the building service areas such as lobbies, corridors and other common areas in a building. The rentable square footageshall be computed by measuring to the inside finish of permanent outer building walls and shall include space used by columns and projections necessary to the building. Business floor space does not include vertical penetrations through the buildingsuch as stairs, elevators, or heating, ventilation, air conditioning, utility, or telephone systems. Business floor space does not include other floor space as defined in subsection B below. If the business floor space is owned by the taxpayer, thebusiness floor space will be calculated in the same manner as above and as if the area was rented.
B. "Other floor space" means rentable square feet used for dining areas, exercise areas, or warehouse space.
1. "Dining area" means any space used exclusively by employees for the purpose of purchasing, preparing, or consuming meals.
2. "Exercise area" means any space used exclusively by employees for the purpose of physical exercise not related to an employee's normal job duties.
3. "Warehouse space" means any space used exclusively for the storage of merchandise or commodities.
Other floor space will be measured in the same manner as business floor space whether owned or rented.
5.46.030 Tax Imposed-Measure of the Tax.
A. A square footage tax for the act or privilege of engaging in business activities within the city is hereby levied upon and shall be collected from every person that leases, owns, occupies or otherwise maintains an office or place of business withinthe city. The tax shall be measured by the number of square feet of business floor space and other floor space for each office or place of business leased, owned, occupied or otherwise maintained within the city during the reporting period.
B. The amount of the tax due shall be equal to the sum of the number of square feet of business floor space for each office or place of business leased, owned, occupied or otherwise maintained within the city multiplied by the rate of $0.39 quarterly($1.56 annually), and the number of square feet of other floor space for each office or place of business leased, owned, occupied or otherwise maintained within the city multiplied by the rate of $0.13 quarterly ($.52 annually). The Director willadjust the square footage tax rate annually for inflation as follows: the tax rate for a year will be equal to the tax rate for the previous year increased (or decreased) by the percentage change in the annual Seattle-Tacoma-Bremerton, WA consumer priceindex for all urban consumers (CPI-U) for the previous year.
C. Persons with more than one office or place of business must include all business floor space and other floor space for all locations. When a person rents space to another person, the person occupying the rental space is responsible for the squarefootage tax on that rental space only if the renter has exclusive right of possession in the space as against the landlord. Space rented for the storage of goods in a warehouse where no walls separate the goods, and where the exclusive right ofpossession in the space is not held by the person to whom the space is rented, shall be included in the other floor space of the person that operates the warehouse business, and not by the business renting the warehouse space.
D. Persons whose business floor space, other floor space, or period of occupancy changes during a reporting period shall prorate the business floor space or other floor space for the reporting period. A change in the period of occupancy during thereporting period shall be prorated using a ratio of the number of days of occupancy during the reporting period compared to the total number of days within the reporting period. If the amount of business floor space or other floor space changes duringthe reporting period, floor space for the period shall be computed as a weighted average of the rentable space occupied during different segments of the reporting period. Weighting will be based upon the percentage of the reporting period that a givenamount of space was leased, owned, occupied, or otherwise maintained within the city.
E. Any person required to pay the square footage tax imposed in this chapter that also pays the business license tax as imposed in SMC 5.45.050 may take a credit against the square footage tax computed as follows:
1. The credit is equal to the square footage tax owed for the reporting period multiplied by the ratio of adjusted gross income derived from the Seattle business location(s) for the reporting period to the total gross income derived from the Seattlebusiness location(s) for the reporting period.
2. For the purpose of this section, "total gross income derived from the Seattle business location(s)" is equal to the total gross income derived from the business activities rendered by, generated from, or attributable to the place(s) of businesslocated within the city.
3. For the purpose of this section, "adjusted gross income derived from the Seattle business location(s)" shall include total gross income derived from the Seattle business location(s) less:
(a) income derived from the sales of tangible personal property and retail services by the Seattle business location(s) delivered to a location within the State of Washington where no local jurisdiction imposes an eligible gross receipts tax; and
(b) the gross income of the Seattle business location(s) subject to the business license tax under SMC 5.45.050G as determined by SMC 5.45.060 through SMC 5.45.080 less the gross income of the Seattle business location(s) subject to the businesslicense tax under SMC 5.45.050G as determined by SMC 5.45.060 through SMC 5.45.076 and SMC 5.45.081.
When the change in income calculated in subsection 3(b) is a negative number, the amount so calculated shall reduce the amount calculated in subsection 3(a); however, if the sum of the totals calculated under subsections 3(a) and 3(b) is a negativenumber, then the adjusted gross income derived from the Seattle business location(s) shall be equal to the total gross income derived from the Seattle business location(s).
4. In computing the tax credit, any gross receipts from manufacturing, extracting, and printing, and also subject to a selling tax (such as retailing and wholesaling) according to the Multiple Activity Tax Credit (SMC 5.45.070), shall be included inthe gross income and the adjusted gross income only once.
5.46.040 Square footage tax -When due.
The tax imposed by this chapter shall be due and payable in accordance with SMC 5.55.040 in the same manner as the business license tax under SMC 5.45. Taxpayers filing their business license tax on a quarterly basis shall file the square footage taxon a quarterly basis and taxpayers filing their business license tax on an annual basis shall file the square footage tax on an annual basis on forms prescribed by the Director. Persons discontinuing their business activities in Seattle shall reportand pay the square footage tax at the same time as they file their final business license tax return.
5.46.050 Exemptions and deductions from the square footage tax.
A. The following persons are exempt from the square footage tax:
1. Any person qualifying under the tax threshold as provided in SMC 5.55.040 D 1 shall be exempt from the square footage tax in the year which they qualify under the tax threshold.
2. Persons that are exempted from taxation by cities pursuant to federal or state statutes or regulations, including, but not limited to, the following:
(a) Insurance businesses and their agents as defined by RCW 48.01.050 and 48.17.010, respectively, and whose total revenue is exempt from the business license tax per SMC 5.45;
(b) Businesses that only sell, manufacture, or distribute motor vehicle fuel as defined in RCW 82.36.010 and exempted under RCW 82.36.440;
(c) Businesses that distribute or sell only liquor as defined in RCW 66.04.010 and exempted in RCW 66.08.120; and
(d) Banks, whose income is apportioned according to WAC Chapter
458-28.
B. Persons owing no business license tax pursuant to SMC 5.45.050 due to exemptions or deductions contained in SMC 5.45.090 or SMC 5.45.100 (with the exception of subsection SMC 5.45.100 W) may take a credit against the square footage tax for the totalamount of the tax.
C. The portion of the business floor space and other floor space that is used exclusively to administer and manage other offices or places of business outside of Seattle shall be considered headquarters activities and shall not be included in thesquare footage tax calculation.
D. Persons taxable under the utility tax pursuant SMC 5.48 are exempt from the square footage tax provided they generate no gross income from activities taxable under SMC 5.45.050. If taxpayers subject to the utility tax generate gross income fromactivities taxable under SMC 5.45.050, only the floor space used in generating such gross income will be subject to the square footage tax provisions of this chapter.
5.46.060 Maximum Square Footage Tax Credit
After application of the square footage tax credit provided in SMC 5.46.030 E, if the gross receipts business license tax assessed under SMC Chapter 5.45 and the square footage tax assessed under SMC Chapter 5.46 combine to result in a tax increase forthe taxpayer when compared to the amount of tax that would have been due under the requirements of SMC Chapter 5.45 in effect prior to the implementation of RCW 35.102.130 on January 1, 2008, then an additional credit may be taken against the squarefootage tax for the amount of such tax increase.
5.46.070 Tax In Addition To Other License Fees Or Taxes.
The tax imposed herein shall be in addition to any license fee or tax imposed or levied under any other law, statute or ordinance whether imposed or levied by the City, State or other governmental entity or political subdivision.
Section 2. Effective January 1, 2008, Section 5.30.010 of the Seattle Municipal Code is amended as follows:
5.30.010 Definition provisions.
The definitions contained in this chapter shall apply to the following chapters of the Seattle Municipal Code: Chapters 5.32 (Amusem*nt Devices), 5.35 (Commercial Parking Taxes), 5.37 (Employee Hour Taxes), 5.40 (Admission Taxes), 5.45 (Businessand Occupation
Section 3. Effective January 1, 2008, Subsection B of 5.30.060 of the Seattle Municipal Code is amended as follows:
5.30.060 Definitions, T-Z.
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B. "Taxpayer" means any "person," as herein defined, required by SMC Chapter 5.55 to have a business license, or liable for any license, tax or fee, or for the collection of any tax or fee, under SMC Chapters 5.32 (Amusem*nt Devices), 5.40 (Admission Taxes), 5.45 (Business and Occupation
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Section 4. Effective January 1, 2008, Section 5.55.010 of the Seattle Municipal Code is amended as follows:
5.55.010 Application of chapter stated.
Unless expressly stated to the contrary in each chapter, the provisions of this chapter shall apply with respect to the licenses and taxes imposed under this chapter and SMC Chapters 5.32 (Amusem*nt Devices), 5.35 (Commercial Parking Taxes), 5.37(Employee Hour Taxes), 5.40 (Admission Taxes), 5.45 (Business and Occupation11
Section 5. Effective January 1, 2008, Subsection 5.55.040 A of the Seattle Municipal Code is amended as follows:
5.55.040 When due and payable Reporting Periods Monthly quarterly, and annual returns Threshold provisions Computing time periods Failure to file returns.
A. Other than any annual license fee or registration fee assessed under this chapter, the tax imposed by SMC Chapters 5.32 (Amusem*nt Devices), 5.35 (Commercial Parking Tax), 5.37 (Employee Hour Taxes), 5.40 (Admission Taxes), 5.45 (Business LicenseTax), 5.48 (Utility Tax), and 5.52 (Gambling Tax), shall be due and payable in quarterly installments. At the Director's discretion, businesses may be assigned to a monthly or annual reporting perioddepending on the tax amount owing or type of tax. Taxes imposed by SMC Section 5.52.030(A)(2)(B)(2)
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Section 6. Effective January 1, 2008, Subsection 5.55.060 A of the Seattle Municipal Code is amended as follows:
5.55.060 Records to be preserved Examination Inspection Search Warrants Estoppel to question assessments.
A. Every person liable for any fee or tax imposed by this chapter, SMC Chapters 5.32, 5.35, 5.37, 5.40, 5.45, 5.48, and 5.52 shall keep and preserve, for a period of five (5) years after filing a tax return, such records as maybe necessary to determine the amount of any fee or tax for which the person may be liable; which records shall include copies of all federal income tax and state tax returns and reports made by the person. All places of business, books, records,papers, invoices, ticket stubs, vendor lists, gambling games and payout information, inventories, stocks of merchandise, and other data, including federal income tax and state tax returns, and reports needed to determine the accuracy of any taxes due,shall be open for inspection or examination at any time by the Director or a duly authorized agent. Every person's business premises shall be open for inspection or examination by the Director or a duly authorized agent.
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Section 7. Effective January 1, 2008, Subsection 5.55.150 E of the Seattle Municipal Code is amended as follows:
5.55.150 Appeal to the hearing examiner.
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E. The Hearing Examiner shall ascertain the correct amount of the tax, fee, interest, or penalty due either by affirming, reversing, or modifying an action of the Director. Reversal or modification is proper if the Director's assessment or refunddenial violates the terms of this chapter, or SMC Chapters 5.30, 5.32, 5.35, 5.37, 5.40, 5.45, 5.48, or 5.52.
Section 8. Effective January 1, 2008, Section 5.55.165 of the Seattle Municipal Code is amended as follows:
5.55.165 Director of Finance to make rules.
The Director of Finance shall have the power and it shall be his or her duty, from time to time, to adopt, publish and enforce rules and regulations not inconsistent with this chapter, SMC Chapters 5.30, 5.32, 5.35, 5.37, 5.40, 5.45, 5.48, 5.52 or with law for the purpose of carrying out the provisions of such chapters, and it shall be unlawful to violate or fail to comply with, any such rule or regulation.
Section 9. Effective January 1, 2008, Subsections 5.55.220 A and B of the Seattle Municipal Code are amended as follows:
5.55.220 Unlawful Actions Violation Penalties.
A. It shall be unlawful for any person liable for amounts due under this chapter, or SMC Chapters 5.32, 5.35, 5.37, 5.40, 5.45, 5.48, and 5.52:
1. To violate or fail to comply with any of the provisions of this chapter, SMC Chapters 5.32, 5.35, 5.37, 5.40, 5.45, 5.48, and 5.52, or any lawful rule or regulation adopted by the Director;
2. To make or manufacture any license required by this chapter except upon authority of the Director;
3. To make any false statement on any license application or tax return;
4. To aid or abet any person in any attempt to evade payment of a license fee or tax;
5. To refuse admission to the Director to inspect the premises and/or records as required by this Chapter, or to otherwise interfere with the Director in the performance of duties imposed by SMC Chapters 5.32, 5.35, 5.37, 5.40, 5.45, 5.48, and 5.52;
6. To fail to appear or testify in response to a subpoena issued pursuant to SMC 3.02.120 in any proceeding to determine compliance with this chapter and SMC Chapters 5.32, 5.35, 5.37, 5.40, 5.45, 5.48 and 5.52;
7. To testify falsely in any investigation, audit, or proceeding conducted pursuant to this chapter; or
8. In any manner, to hinder or delay the City or any of its officers in carrying out the provisions of this chapter or SMC Chapters 5.32, 5.35, 5.37, 5.40, 5.45, 5.48, and 5.52.
B. Each violation of or failure to comply with the provisions of this chapter, or SMC Chapters 5.32, 5.35, 5.37, 5.40, 5.45, 5.48, or 5.52 shall constitute a separate offense. Any person who commits an act defined in subsectionA of this section is guilty of a gross misdemeanor, punishable in accordance with SMC 12A.02.070. The provisions of chapters 12A.02 and 12A.045
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Section 10. Effective January 1, 2008, Subsection 5.55.230 A of the Seattle Municipal Code is amended as follows:
5.55.230 Suspension or revocation of business license.
A. The Director, or his or her designee, shall have the power and authority to suspend or revoke any business license or amusem*nt device license issued under the provisions of this chapter. The Director, or his or her designee, shall notify suchlicensee in writing by certified mail of the suspension or revocation of his or her license and the grounds therefor. Any license issued under this chapter may be suspended or revoked based on one or more of the following grounds:
1. The license was procured by fraud or false representation of fact.
2. The licensee has failed to comply with any provisions of this chapter.
3. The licensee has failed to comply with any provisions of SMC Chapters 5.32, 5.35, 5.37, 5.40, 5.45, 5.48 or 5.52.
4. The licensee is in default in any payment of any license fee or tax under Title 5 or Title 6.
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Section 11. Effective January 1, 2008, Subsection 3.02.125 A of the Seattle Municipal Code is amended as follows:
3.02.125 Hearing Examiner filing fees.
A. Filing fees for hearings before the City Hearing Examiner are as follows:
Basis for Hearing Fee
Admission Tax Deficiency (Ch. 5.40) $50
Admission Tax, Revocation of Exemption (Sec. 5.40.085) No fee
Ballard Avenue Landmark District (Ch. 25.16) 50
Business License Tax Deficiency (Ch. 5.45) 50
Cable Television Ordinance (Ch. 21.60) No fee
Columbia City Landmark District (Ch. 25.20) 50
Design Decision in Multiple Residence Mixed Density 50 Zone (Ch. 24.38)
Fair Employment Practices Ordinance (Ch. 14.04) No fee
Floating Home Moorages (Ch. 7.20) 50 /petitioner; maximum fee 150
Gambling Tax Deficiency (Ch. 5.52) 50
Grading Ordinance (Title 22, Subtitle VIII) 50
Harvard/Belmont Landmark District (Ch. 25.22) 50
Housing Code (Ch. 22.206) 50
Land Use Code Enforcement (Ch. 23.90) 50
Landmark Preservation Controls and Incentives (Sec. No fee 25.12.530)
Landmarks Preservation (Sec. 25.12.740 and Sec. 50 25.12.835)
License Code (Title 6, Subtitle I) 50
Master Use Permit (Ch. 23.76) 50
Noise Ordinance (Ch. 25.08) 50
Open Housing Ordinance (Ch. 14.08) No fee
Pike Place Market Historical District (Ch. 25.24) 50
Pioneer Square Minimum Maintenance Ordinance 50 (Ch. 25.28, Subchapter II)
Planned Unit Development (Ch. 24.66) 50
Plumbing Code (Ch. 20.16, Uniform Plumbing Code, Ord. 50 116594)
Property Tax Exemption, Cancellation of Exemption (Ch. 50 5.72)
Radiofrequency Radiation Ordinance (Ch. 25.10) 50
Refund Anticipation Loan (Ch. 7.26) 5
Relocation Assistance (Ch. 20.84) No fee
Seizure of Property; Controlled Substances (RCW No fee 69.50.505(e))
Special Review Districts (Ch. 23.66) 50
50
State Environmental Policy Act (SEPA) 50 (when not a Master Use Permit component) (Ch. 25.04)
Utility tax (Ch. 5.48) 50
Zoning Map Amendments (Rezones)(Ch. 23.34) No fee
Zoning Rulings and Interpretations (Ch. 23.88) 50
* * *
Section 12. Severability. If any part, provision or section of this ordinance is held to be void or unconstitutional, all other parts, provisions, and sections of this ordinance not expressly so held to be void or unconstitutional shall continue infull force and effect.
Section 13. Pursuant to RCW 35.21.706, this ordinance is subject to the referendum procedure specified in that state law. A referendum petition may be filed within seven days of the passage of the ordinance with the filing officer of the City, whichis hereby designated to be the City Clerk, located on the third floor of City Hall, 600 Fourth Avenue, Seattle, Washington. Within ten days of filing the petition, the City Clerk shall confer with the petitioner concerning the form and style of thepetition, issue the petition an identification number, and secure an accurate, concise, and positive ballot title from the City Attorney. The petitioner shall then have thirty days in which to secure the signatures of not less than fifteen percent ofthe registered voters of the City , as of the last municipal general election, upon petition forms which contain the ballot title and the full text of the measure to be referred. Signed petition forms that are submitted timely to the City Clerk shall betransmitted to the King County Director of Records and Elections who shall verify the sufficiency of the signatures on the petition and report to the City Clerk. If sufficient valid signatures are properly submitted, the City Clerk shall so inform theCity Council, which shall submit the referendum measure to the voters at a special election to be held on the next City election date, as provided in RCW 29A.04.330, that occurs not less than forty-five days after the county's report of sufficiency isreceived by the City Clerk, unless a general election will occur within ninety days of receipt of that report, in which event the proposed ordinance will be submitted at the general election. State law, RCW 35.21.706, provides that the referendumprocedure in this section is exclusive and that this ordinance is not subject to any other referendum or initiative process.
Section 14. Any act pursuant to the authority and prior to the effective date of this ordinance is hereby ratified and confirmed.
Section 15. This ordinance shall take effect and be in force thirty (30) days from and after its approval by the Mayor, but if not approved and returned by the Mayor within ten (10) days after presentation, it shall take effect as provided by MunicipalCode Section 1.04.020.
Passed by the City Council the ____ day of _________, 2007, and signed by me in open session in authentication of its passage this _____ day of __________, 2007. _________________________________ President __________of the City Council
Approved by me this ____ day of _________, 2007. _________________________________ Gregory J. Nickels, Mayor
Filed by me this ____ day of _________, 2007. ____________________________________ City Clerk
October 12, 2007 Version #20
