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The City of Seattle
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An ordinance relating to the business and occupation tax; amending definitions and related provisions due to amendments to the model business license tax ordinance and other state law amendments; amending Sections 5.30.420, 5.30.450, 5.30.510, 5.30.600, and 5.45.050 of the Seattle Municipal Code; and adding new Sections 5.30.530 and 5.30.540 to the Seattle Municipal Code.
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Recitals:
During the 2026 session, the Washington State Legislature passed Senate Bill 6113 (SB 6113), enacted as Chapter 250, Laws of 2026.
SB 6113 amended RCW 82.04.050, making technical corrections and clarifications, including adding or refining the definitions of “data processing service,” “investigation services,” and “advertising services,” clarifying the tax treatment of temporary staffing services, live presentations, and paymaster services, and updating cross-references governing sales at wholesale.
During the 2026 session, the Washington State Legislature also passed Senate Bill 6346 (SB 6346), enacted as Chapter 238, Laws of 2026.
SB 6346 revised the tax treatment of certain services, including an exclusion from the definition of “retail sale” for staffing services utilized by hospital-based clinical providers to supplement fulfillment of hospital contracts for professional services.
Under chapter 35.102 RCW, a task force of city representatives has worked with the Association of Washington Cities to amend the state model municipal business and tax ordinance to implement the changes made by SB 6113 and SB 6346.
Cities imposing a business and occupation tax are required to adopt the changes to the model ordinance made in SB 6113 and SB 6346 by January 1, 2027.
Chapters 5.30 and 5.45 of the Seattle Municipal Code need additional amendments to be consistent with the model ordinance. Therefore,
Be it ordained by The City of Seattle as follows:
Section 1. Section 5.30.420 of the Seattle Municipal Code, enacted by Ordinance 127353, is amended as follows:
5.30.420 Sale at retail-Information technology, custom website development, security, temporary staffing, advertising, and live presentations
Except as provided in Section 5.30.530, the term "((Sale)) sale at retail" or "retail sale" also includes the sale of or charge made for personal, business, or professional services including amounts designated as interest, rents, fees, admission, and other service emoluments however designated, received by persons engaging in the following business activities:
A.
1. Information technology training services, technical support, and other services including, but not limited to, assisting with network operations and support, help desk services, in-person training related to hardware or software, network system support services, data entry services, and data processing services;
2. For purposes of this subsection 5.30.420 A, “data processing service” has the same meaning as in subsection 5.30.450.B.2.b. Data processing does not include the service described in subsection 5.30.450.B.2.a;
B. Custom website development services. For the purposes of this ((Section)) subsection 5.30.420.B, "website development services" means the design, development, and support of a website provided by a website developer to a customer;
C. Investigation services, security services, security monitoring services, and armored car services including, but not limited to, background checks, security guard and patrol services, personal and event security, armored car transportation of cash and valuables, and security system services and monitoring. This does not include locksmith services. ((;)) For the purposes of this subsection 5.30.420.C, "investigation services" means providing investigation, detective, and personal background check services including private detective services, background check services, fingerprint services, bounty hunting services, private investigation services, lie detection and polygraph services, missing person tracing services, and skip tracing services;
D. ((Temporary)) Except as provided in subsections 5.30.420 D.1, 5.30.420.D.2, and 5.30.420.D.3, temporary staffing services; ((. For the purposes of this Section 5.30.420, "temporary staffing services" means providing workers to other businesses, except for hospitals licensed under chapter 70.41 or 71.12 RCW, for limited periods of time to supplement their workforce and fill employment vacancies on a contract or for fee basis;))
1. Temporary staffing services do not include staffing services provided to hospitals licensed under chapter 70.41 or 71.12 RCW, for limited periods of time to supplement their workforce and fill employment vacancies on a contract or for a fee basis.
2. Temporary staffing services also do not include paymaster services to the extent amounts received from such services are deductible under RCW 82.04.43393.
3. "Temporary staffing services" do not include staffing services utilized by hospital-based clinical providers to supplement their fulfillment of hospital contracts for professional services and that are utilized for limited periods of time to supplement hospital staffing;
4. For the purposes of this subsection 5.30.420.D:
a. "Temporary staffing services" has the same meaning as "staffing service" in RCW 82.04.540, which does not include services merely rendered by an independent contractor unless the services rendered by the independent contractor meet the definition of "staffing service."
b. "Paymaster services" has the same meaning as in RCW 82.04.43393;
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F. Live presentations
1. Live presentations including, but not limited to, lectures, seminars, workshops, or courses where participants attend either in-person or via the internet or telecommunications equipment that allows audience members and the presenter or instructor to give, receive, and discuss information with each other in real time.
2. “Live presentations” do not include:
a. Classes provided by preschools;
b. Classes provided by elementary schools, secondary schools, and institutions of higher education as part of their accreditation;
c. Musical, dramatic, comedic, or similar performances including any incidental instruction;
d. One-on-one instructional activities including tutoring and consulting;
e. Music lessons regardless of the number of participants;
f. Presentations given at the physical location of a facility exempt from property tax under RCW 84.36.020(2). For the purposes of this subsection 5.30.420.F.2.f:
1) Presentations where participants may join via internet or telecommunications equipment are given at the physical location of the presenter during the real-time presentation; and
2) Presentations where all participants, other than the presenter, attend at the physical location of a facility exempt from property tax under RCW 84.36.020(2) are given at the physical location of the participants regardless of the location of the presenter at the time of the presentation;
g. Youth camps;
h. Before and after school care provided in-person and on-site by elementary schools; and
i. Presentations given by a nonprofit organization exempt from federal income tax under Title 26 U.S.C. Sec. 501(c) of the federal Internal Revenue Code.
((For the purposes of subsections 5.30.420.A, 5.30.420.B, 5.30.420.C, and 5.30.420.E, the terms "sale at retail" and "retail sale" do not include a sale between members of an affiliated group as defined in RCW 82.04.299(1)(f).))
Section 2. Section 5.30.450 of the Seattle Municipal Code, last amended by Ordinance 127353, is amended as follows:
5.30.450 Sale at retail-Software
A. Except as provided in Section 5.30.530, the term "((Sale)) sale at retail" or "retail sale" shall also include the sale of prewritten software, custom software, and customization of prewritten computer software other than a sale to a person who presents a resale certificate under RCW 82.04.470, regardless of the method of delivery to the end user. For purposes of this subsection 5.30.450.A, the sale of prewritten computer software includes the sale of or charge made for a key or an enabling or activation code, where the key or code is required to activate prewritten computer software and put the software into use. There is no separate sale of the key or code from the prewritten computer software, regardless of how the sale may be characterized by the vendor or by the purchaser.
B.
1. Except as provided in Section 5.30.530, ((The)) the term "sale at retail" or "retail sale" also includes the charge made to consumers for the right to access and use prewritten computer software, custom software, and customization of prewritten computer software, where possession of the software is maintained by the seller or a third party, regardless of whether the charge for the service is on a per use, per user, per license, subscription, or some other basis.
2.
a. The service described in subsection 5.30.450.B.1 includes the right to access and use prewritten software, custom software, and customization of prewritten software to perform data processing.
b. For purposes of this subsection 5.30.450.B.2, "data processing" means the systematic performance of operations on data to extract the required information in an appropriate form or to convert the data to usable information. Data processing includes check processing, image processing, form processing, survey processing, payroll processing, claim processing, and similar activities.
Section 3. Section 5.30.510 of the Seattle Municipal Code, last amended by Ordinance 127353, is amended as follows:
5.30.510 Sale at retail-Consumer digital sales
A. Except as provided in Section 5.30.530, the term "((Sale)) sale at retail" or "retail sale" shall also include the following sales to consumers of digital goods, digital codes, and digital automated services:
1. Sales in which the seller has granted the purchaser the right of permanent use;
2. Sales in which the seller has granted the purchaser a right of use that is less than permanent;
3. Sales in which the purchaser is not obligated to make continued payment as a condition of the sale; and
4. Sales in which the purchaser is obligated to make continued payment as a condition of the sale.
B. A retail sale of digital goods, digital codes, or digital automated services under this Section 5.30.510 includes any services provided by the seller exclusively in connection with the digital goods, digital codes, or digital automated services, whether or not a separate charge is made for such services.
((C. A retail sale of digital goods, digital codes, or digital automated services does not include the following services if the sale occurs between members of an affiliated group as defined in RCW 82.04.299(1)(f):
1. Any service that primarily involves the application of human effort by the seller, and the human effort originated after the customer requested the service;
2. Live presentations, such as lectures, seminars, workshops, or courses, where participants are connected to other participants via the internet or telecommunications equipment, which allows audience members and the presenter or instructor to give, receive, and discuss information with each other in real time;
3. Advertising services. For purposes of this subsection 5.30.510.C, "advertising services" means all services directly related to the creation, preparation, production, or dissemination of advertisements. Advertising services include layout, art direction, graphic design, mechanical preparation, production supervision, placement, and rendering advice to a client concerning the best methods of advertising that client's products or services. Advertising services also include online referrals, search engine marketing and lead generation optimization, web campaign planning, the acquisition of advertising space in the internet media, and the monitoring and evaluation of website traffic for purposes of determining the effectiveness of an advertising campaign. Advertising services do not include web hosting services and domain name registration; and
4. Data processing services. For purposes of this subsection 5.30.510.C, "data processing service" means a primarily automated service provided to a business or other organization where the primary object of the service is the systematic performance of operations by the service provider on data supplied in whole or in part by the customer to extract the required information in an appropriate form or to convert the data to usable information. Data processing services include check processing, image processing, form processing, survey processing, payroll processing, claim processing, and similar activities. Data processing does not include the service described in subsection 5.30.450.B.))
C. For purposes of this Section 5.30.510, "permanent" means perpetual or for an indefinite or unspecified length of time. A right of permanent use is presumed to have been granted unless the agreement between the seller and the purchaser specifies or the circumstances surrounding the transaction suggest or indicate that the right to use terminates on the occurrence of a condition subsequent.
Section 4. A new Section 5.30.530 is added to the Seattle Municipal Code as follows:
5.30.530 Sale at retail - Exclusion for sales of certain services if the sale occurs between members of an affiliated group
The term "sale at retail" or "retail sale" does not include the following services if the sale occurs between members of an affiliated group as defined in RCW 82.04.299(1)(f):
A. Services described in subsection 5.30.420.A, 5.30.420.B, 5.30.420.C, 5.30.420.E, and 5.30.420.F whether provided in-person or transferred electronically;
B. Custom software and customization of prewritten computer software to a consumer, regardless of the method of delivery to the end user;
C. Any digital automated services that primarily involves the application of human effort by the seller, and the human effort originated after the customer requested the service; and
D. Data processing services. For purposes of this Section 5.30.530, "data processing service" has the same meaning as in subsection 5.30.420.A.2.
Section 5. A new Section 5.30.540 is added to the Seattle Municipal Code as follows:
5.30.540 Sale at retail - Exclusion for sales of services provided by a public agency to another public agency pursuant to an interlocal agreement
The term "sale at retail" or "retail sale" does not include services provided by a public agency to another public agency pursuant to an interlocal agreement under chapter 39.34 RCW.
Section 6. Section 5.30.600 of the Seattle Municipal Code, last amended by Ordinance 127353, is amended as follows:
5.30.600 Sale at wholesale and wholesale sale
"Sale at wholesale" or "wholesale sale" means any sale of tangible personal property, digital goods, digital codes, or digital automated services, prewritten computer software, custom software, customization of prewritten software to a consumer, services defined as a retail sale in Section 5.30.420, or services described in subsection 5.30.450.B.1, which is not a retail sale, and any charge made for labor and services rendered for persons who are not consumers, in respect to real or personal property and retail services, if such charge is expressly defined as a retail sale or retail service when rendered to or for consumers. Sale at wholesale also includes the sale of telephone business to another telecommunications company for the purpose of resale, as contemplated by RCW 35.21.715.
Notwithstanding the above, "sale at wholesale" or "wholesale sale" shall specifically not include a distribution cooperative's or its distribution affiliate's sales of merchandise to a customer-owner of the distribution cooperative for the customer-owner's resale at retail. A distribution cooperative or a distribution affiliate is taxed on such sales pursuant to subsection 5.45.050.F.
Section 7. Section 5.45.050 of the Seattle Municipal Code, last amended by Ordinance 127267, is amended as follows:
5.45.050 Imposition of the tax-Tax or fee levied
Except as provided in subsection 5.55.040.D.1, there is hereby levied upon and shall be collected from every person a tax for the act or privilege of engaging in business activities within the City, whether the person's office or place of business be within or without the City. The tax shall be in amounts to be determined by application of rates against gross proceeds of sale, gross income of business, or value of products, including by-products, as the case may be, as follows:
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F. Upon every other person engaging within the City in any business activity other than or in addition to those enumerated in the above subsections; as to such persons, the amount of tax on account of such activities shall be equal to the gross income of the business multiplied by the rate of .00415 through December 31, 2016, and beginning January 1, 2017, through December 31, 2017, by the rate of .00423, beginning January 1, 2018 through December 31, 2025, by the rate of .00427, and beginning January 1, 2026, through December 31, 2032, by the rate of .00658, and beginning January 1, 2033, by the rate of .00526. This subsection includes, among others, and without limiting the scope hereof (whether or not title to material used in the performance of such business passes to another by accession, merger, or other than by outright sale), ((persons engaged in the business of developing or producing custom software or of customizing canned software,)) producing royalties or commissions, persons engaged in the business of freight brokering, and persons engaged in the business of rendering any type of service which does not constitute a sale at retail, a sale at wholesale, or a retail service.
Section 8. This ordinance does not affect any existing right acquired or liability or obligation incurred under the sections amended or repealed in this ordinance or under any rule or order adopted under those sections, nor does it affect any proceeding instituted under those sections.
Section 9. This ordinance shall take effect on January 1, 2027.
Passed by the City Council and signed in open session in authentication of its passage on .
President of the City Council
on .
Katie B. Wilson, Mayor
Lenné Dedman, City Clerk