Effective January 1, 2021, through December 31, 2040, employers engaging in business in Seattle will be subject to a payroll expense tax. This is an employer-paid tax on the “payroll expense” of the business, meaning the compensation paid in Seattle to employees. The Seattle Department of Finance and Administrative Services will administer the tax and will draft regulations [Ordinance No. 126108, L. 2020].
An employer cannot make any deductions from employee compensation to pay for this tax. The rate will vary based on the employer’s total Seattle payroll expenses, including compensation paid to Seattle employees. The first payment for all of 2021 will be due by January 31, 2022. After that, the tax will be collected and reported on a quarterly basis.
Want to learn more about local payroll taxes? Check out APA’s Local Income Tax Compliance four-part webinar series, beginning September 23. It will also be offered on demand. Register today!
Lia Coniglio, Esq., is Managing Editor of PayState Update and Manager of State Payroll Information Resources for the APA.