Service area · Seattle, Washington
Bookkeeping for Seattle contractors.
Seattle has more contracting businesses than any other city in Washington. It also changed its business tax more than anywhere else in the state this year, and most contractors have not caught up with what that means.
3,641
497
$2M
Seattle · city tax profile
2026
$2,000,000
Still file
0.342%
Same rate
None
$73 to $3,210
January 2026
Most Seattle contractors now owe no city B&O tax.
Under the Seattle Shield ordinances, the city’s B&O threshold rose from $100,000 to $2 million on 1 January 2026, with a $2 million standard deduction on top for businesses above it.
For a contracting business turning over anything under $2 million in Seattle, the city B&O tax bill is now zero. That covers the overwhelming majority of trades businesses in the city.
And here is the part that catches people.
Owing nothing is not the same as having nothing to do. You are still required to file a return and report your gross revenue to the city, even if the figure is zero and even if no tax is due. You also still need a business licence tax certificate, and you still have to renew it.
What actually changed
- Threshold: $100,000 to $2 million.
- Standard deduction: a further $2 million for businesses above the threshold.
- Rates went up for those still paying.
- Filing did not change. Under the threshold, you still file and still report.
The rates
If you are above it, the classification matters.
Seattle’s rates for 2026 through 2032. Which one applies depends on the kind of work, and a contracting business can easily report under more than one.
One difference worth knowing if you also work in Kent
In Kent, billing a property owner and billing a general contractor put you in different classifications at different rates, so subcontract work is taxed at double. In Seattle, retailing and wholesaling sit at the same 0.342%, so that particular split does not change what you owe here.
What does change things is service work. Anything falling under service and other business activities is taxed at nearly twice the construction rate, so consulting, project management or repair work billed separately needs to be recorded as such rather than lumped in with construction income.
The licence
The licence is separate from the tax.
Anyone doing business in Seattle needs a business licence tax certificate, renewed every year by 31 December. The fee is charged whether or not you owe any B&O tax.
The trap in the fee
The licence fee is calculated on your taxable revenue before the standard deduction is applied. So a contractor doing $1.5 million in Seattle owes no B&O tax at all, and still pays a $667 licence fee based on that same revenue.
Renew by 31 December
No penalty
No penalty
$10
$20
Late filing
Seattle charges interest as well as penalties.
The late penalties match what most Washington cities charge. What Seattle adds on top is interest, running from the due date until the day you pay, at a rate the city sets each year. It was 7% for 2025.
None of it applies if you owe no tax. But you have to have filed to prove that, which is the whole reason the filing requirement survives the new threshold.
Sales tax
Seattle’s rate is not your rate everywhere.
Washington sources retail sales tax to the job site, not your office. Seattle carries one of the higher combined rates in the state, so a Seattle-based contractor working south of the city is charging a different rate that week.
What that means for your books
- Your invoicing has to carry the job location, not just the client.
- Your bookkeeping has to keep those rates apart across jobs.
- Rates change quarterly, so one default rate set and forgotten drifts out of date.
Contractors who run one default tax rate across every invoice are the ones who find the problem at audit. If most of your work is in Seattle but some of it is not, that is exactly the situation where it goes wrong quietly.
The work
What I actually do about all this.
I keep the books. I do not file your taxes and I am not your CPA. What I do is make sure the numbers behind every one of those filings are right, and hand your tax preparer statements they can work from without rebuilding anything.
- A Seattle return that gets filed, threshold or no threshold, so a zero-tax year does not turn into a compliance problem.
- Construction income kept apart from service income, because in Seattle that is the split that changes the rate.
- Job costing that matches how you bid, so you can see which jobs made money and which only looked like they did.
- Every account reconciled to the penny against its real statement, every month.
- Licence renewal on the calendar before 31 December, every year.
Where to start
Behind on the books, or not sure they would survive a look? Start with cleanup. Running fine but want them kept right? Start with monthly.
Questions
Questions Seattle contractors ask.
Don’t see yours? Email me at paulaleksic@apcbookkeeping.com
Yes. The city is explicit about it: under the threshold you owe no B&O tax, but you must still file a return and report your gross revenue, even if that figure is zero. Owing nothing and doing nothing are not the same thing.
Because the licence fee is worked out on your taxable revenue before the standard deduction. A business doing $1.5 million in Seattle pays no B&O tax and still pays the $667 fee for 2026.
Not for the rate. Retailing and wholesaling are both 0.342% in Seattle, unlike Kent where subcontract work is taxed at double. What matters here is keeping construction income apart from service income, which is taxed at 0.658%.
You may still have a Seattle filing obligation. Where you are based matters less than where the work is done, and the licence requirement applies to doing business in the city. Confirm your position with City Finance and then let us set the books up to support it.
Then we start with cleanup: rebuild the ledger from your statements, reconcile every account, and work out what the position actually is before anyone files anything. Multi-year cleanups are routine work here.
Book a free consult
Tell me where the books stand.
Fifteen questions about your business and your books. I read every one personally, and you get a straight answer about what it would take to put your Seattle filings on solid ground.