Seattle’s Proposed B&O Tax Reform Could Bring Relief to Small Businesses — But More Work Remains

GSBA Official Statement

This week, the City of Seattle’s Select Budget Committee is set to vote on a proposal to restructure the city’s Business & Occupation tax. The proposal would eliminate B&O tax for businesses making less than $2 million gross, and, for businesses making more, would exempt the first $2 million from taxation. It would also increase tax rates for retail, wholesale, and service-based businesses. It is estimated that businesses earning less than $5.7 million gross per year will receive lower taxes, impacting 90% of Seattle’s business community.

GSBA is thrilled that Seattle’s leaders have listened to the small business community in their request for immediate support. If passed, this measure will provide thousands of dollars of relief for small businesses starting in 2026, a year before statewide tax increases are set to begin.

That said, we worry about potential impacts the tax could bring to Seattle’s downtown core. $5.7 million in gross income might sound like a lot, but combined with the increased costs of labor, inflation, tariffs, insurance rates, and business development, owners are often left with extremely slim margins, some as low as 1–1.5%. These issues contribute to the low activation rate of Seattle’s downtown core – overall downtown office vacancy reached 34.6% this month, a record high for the region. It is essential that City leaders work directly with these stakeholders to create policies that improve their ease of doing business downtown.

The data is clear: this legislation – while important – must be the first step of many that are being taken to revitalize our city’s economy. Seattle businesses need a voice — in a recent poll, 70% of business owners indicated that they do not feel supported by the City of Seattle. 63% indicated that more support for safety and cleanliness, as well as lower taxes or fees, would be the most helpful to their business right now.

To help bridge this gap in support, we encourage Seattle City Council, as well as all Mayoral candidates, to commit to convening a Small Business Advisory Council similar to the one the City convened in 2018. This group would be tasked with ensuring small businesses have a role in informing policies and programs and have the access to the resources they need to thrive.

We also call on City leaders to commit to working with partners in the retail industry, including workers and business owners, to facilitate growth and activation of downtown Seattle’s retail core.

GSBA is excited to continue to work with our members, community stakeholders, and city leaders to improve Seattle’s business climate and reignite our vibrant downtown retail core.