Voters in Seattle have overwhelmingly approved Proposition 2, which will reshape the city’s business and occupation (B&O) tax that applies to gross revenue. It will impact both small startups and large tech companies such as Amazon.
The ballot measure garnered a 67.7% approval in King County’s unofficial election results posted Tuesday evening.
The initiative will temporarily eliminate B&O taxes for small- and medium-sized businesses — including tech startups — with gross receipts of $2 million or less.
To offset the revenue loss for the city, large companies would see their B&O tax rate increase by more than 50% — from 0.427% to 0.65% for service businesses. Only revenue above $2 million will be taxed.
The new tax rules is expected to raise an additional $81 million per year for human services and other city programs.
The city, which is trying to address a substantial budget shortfall over the next two years, says about 90% of small- and medium-sized businesses in Seattle will pay fewer B&O taxes if the proposal passes.
Smaller companies and those just getting off the ground would no longer pay B&O taxes, potentially saving them thousands of dollars per year. A services company with $1 million in revenue pays $4,270 in B&O tax annually at the current rate.
The tax change adds another wrinkle to the dynamic between Amazon — Seattle’s largest employer — and city lawmakers, following years of a strained relationship over tax policy.
GeekWire has reached out to Amazon for comment on the new B&O tax.
Seattle Mayor Bruce Harrell and Councilmember Alexis Mercedes Rinck unveiled the proposal in June, framing it as a way to protect Seattle’s small businesses while shielding from potential federal funding cuts. They have also cited the city’s gaping budget deficit.
Jon Scholes, president and CEO of the Downtown Seattle Association, called it “a boneheaded proposal of epic proportions” in a post on LinkedIn in June. Scholes supported exempting small businesses from the B&O tax. But he said raising taxes on larger companies “will ultimately result in Seattle defunding its tax base.”
Previously: Bold or boneheaded? Seattle’s proposed tax hike on big business draws fire as Amazon stays silent
