Seattle City Council passes employee hours tax

May 17, 2018
May 17, 2018
0 min. read

On May 14, 2018, the City of Seattle adopted an amended version of CB 119250, an ordinance establishing an “Employer Hours Tax” (EHT). Effective Jan. 1, 2019, the EHT would be imposed on businesses with taxable gross income sourced to Seattle of more than $20 million per year.  Businesses that meet the taxable receipts threshold will be obligated to pay the EHT under one of two methods: 1) based upon a rate of $0.14323 per hours worked within the city, or 2) the Alternative Full Time Equivalent (FTE) method based upon $275 per full-time employee annually. 

The original version of the ordinance passed the city council by a vote of five to four. However, Seattle Mayor Jenny Durkan released a statement indicating that she would not support the bill.  Recognizing the mayor’s authority to veto the bill, council reduced the tax rate and FTE requirements by almost half. The original version also included a provision that would ultimately transition the EHT to a payroll tax.

The amended EHT is currently scheduled to sunset on Dec. 31, 2023. It has been reported that Mayor Durkan intends to sign the ordinance into law.


The adoption of the EHT is intended to address the increase in homelessness within Seattle due to increasing rents. The taxes collected would be used to provide affordable housing and services to persons experiencing homelessness.

Taxpayers that are reporting more than $20 million of taxable gross income to the city for purposes of the City of Seattle’s Business License tax will be required to report the EHT as of Jan. 1, 2019. Taxpayers that are required to pay the new tax may use either the $0.14323 of employee hours worked within the City methodology, or the Alternative Full Time Equivalent (FTE) method based upon $275 per full-time employee annually. 

Businesses that may be subject to the EHT should speak to their state and local tax advisers about applicable exemptions and compliance with the new tax. 

RSM contributors

  • Kirsten Moritz-Baune
    Senior Director

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