APC Bookkeeping

Service area · Federal Way, Washington

Bookkeeping for Federal Way contractors.

Federal Way is the straightforward one. Of the cities covered here it is the only one with no city business tax at all, which removes a filing headache and leaves the parts that actually decide whether you make money.

1,032

Active contracting businesses registered in Federal Way.

155

Of them took out a licence in the past year.

None

City B&O tax. Unlike Kent, Renton, Auburn and Seattle.

Federal Way · city tax profile

2026

City B&O tax

None

Square footage tax

None

City prime vs sub split

None

City business licence

Required

State B&O tax

Applies

Retail sales tax

By job site

Checked against the AWC statewide list and MRSC, September 2026.

The good news

One less return to file.

Washington cities may levy their own business and occupation tax on top of the state’s. Many around here do. Federal Way does not appear on the statewide list of cities that have established one.

Fig. 01City B&O rate on construction billed to the property owner
Seattle0.342%
Kent0.1%
Renton0.070%
Auburn0.05%
Federal WayNo city B&O tax
Rates only. Each city also sets its own threshold: Kent taxes above a $250,000 credit, Renton above $500,000, Auburn above $500,000 companywide, Seattle above $2 million.

For a contractor based in Federal Way that means no city gross receipts return, no square footage calculation, no prime-versus-subcontract classification to get wrong, and no city threshold to track. Those are all real obligations a few miles up the valley.

You do still need a city business licence. Federal Way issues it through the state Business Licensing Service as a city endorsement, so it is added to your state licence rather than applied for separately. The fee depends on how many employees work within the city limits, and a home-based business is charged a flat fee.

What you skip here

City B&O return

Not required

Square footage tax

Not required

City classification split

Not required

City business licence

Required

Confirm your own position with the city on 253-835-2526 before assuming it. Licensing rules change more often than tax rates do.

The rest of it

Everything that is not the city still applies.

No city B&O tax is not the same as no obligations. The two that cost contractors real money are both still live, and neither is a city matter.

Fig. 02The tax layers on a Federal Way job
CityCity B&O taxNone here
StateState B&O taxApplies
Job siteRetail sales taxJob-site rate
A city business licence is still required, issued as an endorsement on your state licence.

State B&O tax

The Washington state B&O tax is entirely separate from any city tax and applies wherever you are based. It has its own classifications, its own rates and its own filing schedule through the Department of Revenue, and the prime-versus-subcontractor distinction is alive and well at the state level even though Federal Way does not use it.

Retail sales tax

Sourced to the job site, not to your office. This is the one that quietly goes wrong for contractors who work across the south end, because the rate changes with the address and not with the client.

And the one that is not a tax at all

Whether a job made money is not a filing question, and no city rule will tell you the answer. It is the single thing contractors most often cannot see in their own books, and it is the same problem in Federal Way as everywhere else.

Across the line

Your city is simple. Your jobs may not be.

Being based in Federal Way does not exempt you from other cities’ rules. Those rules follow the work, not the office, and the valley is full of city boundaries.

Fig. 03The neighbours, side by side
Swipe to compare every city →
KentAuburnRentonSeattleFederal Way
City B&O returnYesYesYesYesNone
Square footage taxYesYesNoneNoneNone
Subcontract rate against prime2×3.6×1.7×SameNone
Revenue threshold$250K credit$500K companywide$500K$2MNone
Auburn can grant non-filing status to businesses under its thresholds. Seattle and Renton expect a return even when no tax is due.

Take enough work in Kent, Auburn, Renton or Seattle and you may pick up a licence requirement, a filing requirement, or both, in a city you do not live in. Each has its own threshold and its own idea of what counts.

Auburn is the sharpest example: its threshold is measured on companywide gross receipts rather than Auburn receipts, so a Federal Way contractor with one Auburn job can be inside Auburn’s regime on the strength of turnover earned everywhere else.

None of this is a reason to avoid the work. It is a reason for the books to know where every job was.

Where the value is

With no city return to chase, the books can do something useful.

In Kent or Auburn a good chunk of the bookkeeping effort goes into getting a city filing right. Here that effort is free to go somewhere that actually changes decisions: knowing which jobs, crews and customers make money.

Fig. 04Example job, costed
$48,000Contract
−$15,600Materials
−$17,300Labour
−$6,200Subs
−$1,900Equipment
$7,000Gross profit
Gross margin on the job14.6%
Illustrative figures, not client data. Monthly job costing gives you this view for every job you run.

What that looks like monthly

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.

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 Federal Way contractors ask.

Don’t see yours? Email me at paulaleksic@apcbookkeeping.com

No city business and occupation tax, no. Federal Way does not appear on the statewide list of cities that have established one, which is maintained by the Association of Washington Cities. You still need a city business licence, and the state B&O tax still applies. Confirm your own situation with the city on 253-835-2526.

Yes. Federal Way requires a licence for businesses located in the city or doing business in it. It is issued as a city endorsement on your state business licence, and the fee depends on how many employees work inside the city limits.

Then those cities’ rules may apply to that work, and Auburn’s threshold is measured on companywide revenue rather than Auburn revenue. Being based in Federal Way does not exempt you. The fix is bookkeeping: record where each job was.

Accurate books, reconciled accounts, correct sales tax, job costing that shows which work is profitable, and a year-end package your CPA does not have to rebuild. The city return was never the point.

Start with cleanup. Rebuild the ledger from your statements, reconcile everything, and find out what the real position 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 get your books telling you something useful.