Seattle tax on big businesses upheld by state appeals court

Tax Law

An appellate court judge has upheld Seattle’s payroll tax, affirming a decision made in King County Superior Court last year.

In an opinion published Tuesday, the Division I Court of Appeals deemed Seattle’s JumpStart tax lawful, The Seattle Times reported.

“Engaging in business is a substantial privilege on which the city may properly levy taxes,” the opinion reads. “And the use of a business’s payroll expense is an appropriate measure of that taxable incident.”

The tax, passed by the Seattle City Council in 2020, requires businesses with at least $7 million in annual payroll to pay between 0.7%-2.4% on salaries and wages paid to Seattle employees who make at least $150,000 per year. The highest rate is applied to salaries of at least $400,000 at companies with at least $1 billion in annual payroll.

In 2021, the tax brought $231 million in revenue to the city.

The lawsuit, filed by the Seattle Metropolitan Chamber of Commerce in December 2020, asked the King County Superior Court to strike down the tax, calling it illegal.

The lawsuit was dismissed by a King County Superior Court judge last summer, and the chamber appealed the decision.

The chamber in a statement Tuesday said it will review the latest decision and determine their next step with members and attorneys.

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