Seattle Proposes B&O Tax Increase

This fall, Seattle voters will be asked to decide on an increase to the city’s Business & Occupation (B&O) tax. The proposal comes from Seattle Mayor Bruce Harrell and Councilmember Alexis Mercedes Rinck and could have significant implications for REALTORS®, real estate firms, and the broader business climate of the city.

The proposal increases the standard B&O tax exemption from $100,000 to $2 million. Businesses with gross revenue above $2 million will pay a higher rate of tax. The services category, in which real estate commissions are captured, will rise from 0.427% to 0.658%, an increase of $2,310 per $1 million of revenue.

Because the proposal raises B&O tax rates above the maximum rate allowed by the state, voters would need to approve the measure at the general election on November 4, 2025.

The tax increase is anticipated to generate $90 million of new general fund revenue. Stated uses for the new revenue include food access, gender-based violence prevention, small business supports, emergency shelters, homelessness prevention and support for worker rights and protections. Additionally, funds will serve to mitigate federal funding cuts in the areas of housing stability, food insecurity, financial stability for the affordable housing sector and emergency shelter and homelessness.

The tax exemption element of the proposal will relieve as many as 75% of all current B&O taxpayers of the obligation. While this is beneficial, it means the tax burden will lie exclusively on businesses with the highest gross revenues. Like the Payroll Expense Tax, it appears the tax will be high and narrow rather than low and broad-based. This could drive more businesses outside Seattle at a time of economic uncertainty.

Seattle King County REALTORS®, in collaboration with the Seattle Metro Chamber and others in the business community, expressed these thoughts on the tax:

“Giving a B&O tax break to many Seattle businesses right now is a great idea—one that we have advocated for to help fill empty storefronts downtown, spur small business growth, and to help offset rising costs, including from public safety challenges.

“However, raising the B&O on any employer right now is a bad idea – especially given the economic facts presented by the City of Seattle itself: regional employment has declined, Seattle office vacancy is one of the highest in the U.S., consumer spending has weakened, there are fewer international visitors expected, and economic uncertainty looms from tariffs. And this proposal comes just months after the legislature passed the largest tax increases in state history.”