Seattle’s Payroll Expense Tax (Local Business Tax)

By Sound Payroll | December 15, 2025

One of the most important city-specific payroll planning issues in Seattle is the Payroll Expense Tax — sometimes referred to as Seattle’s JumpStart Payroll Tax — which directly affects employers:

What It Is

  • Seattle imposes a payroll expense tax on businesses engaging in business in the city that have sufficiently large payrolls and at least one highly-compensated employee.

Who Must Pay

  • For 2025 filings, a business is subject to the tax if:
    • It had $8,837,302 or more in Seattle payroll expense in the prior calendar year (2024), and
    • Has at least one employee in Seattle with annual compensation ≥ $189,371 in the current year.

Tax Structure

  • The tax is progressive based on:
    • the total Seattle payroll expense, and
    • the compensation level of employees earning above thresholds.

Filing & Due Dates

  • Quarterly Returns: Employers file quarterly returns (including a fourth quarter packet due Jan. 31 following the calendar year). Seattle.gov
  • That means for 2025 year-end payroll planning, the Q4 2025 filing and payment is due January 31, 2026.

Year-End Planning Impacts

Tax Threshold and Payroll Projections

  • You need accurate projections of annual Seattle payroll to determine if you’ll cross the thresholds triggering tax liability.
  • For large employers, this includes estimating:
    • year-end wages,
    • bonuses,
    • stock/compensation of high-earning employees,
    • and timing of raises.
      The last quarter can mean the difference between being above or below thresholds, especially if thresholds are close.

Employee Compensation Timing

  • Because compensation (e.g., bonuses, RSU vesting events) counts toward the tax base, consider timing those in a way that aligns with cash flow and tax exposure. Final quarter compensation decisions can materially affect tax liability.

Remote Work & Apportionment

  • If employees work partially outside Seattle or remotely, you must choose and consistently apply a method (Hours or Primarily Assigned) to apportion payroll subject to the tax.

Recordkeeping

  • Retain detailed payroll records that show where work was performed and where employees were primarily assigned, since this can influence tax measurement and compliance. Seattle.gov
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