If you’re an employer in Seattle, Washington, you may need to know about the JumpStart tax. The tax helps fund services for Seattle’s low-income population. Read on to learn more about Seattle’s JumpStart tax.
What is the Seattle JumpStart tax?
On July 6, 2020, Seattle’s city council approved a new payroll expense tax for certain businesses operating in Seattle. The JumpStart Seattle tax took effect on January 1, 2021 and currently has an end date of December 31, 2040.
Again, the JumpStart payroll expense tax provides services to Seattle’s low-income population. The tax also helps replenish Seattle’s Emergency Management Fund and Revenue Stabilization Fund.
Who is responsible for the Seattle payroll expense tax?
The Seattle JumpStart tax is an employer-funded tax. Employers cannot make deductions from employees’ compensation for this tax.
So, which employers must pay the tax? You need to pay the tax on employee wages in 2024 if you have:
- More than $8,511,281 in annual payroll expenses in 2023 AND
- At least one employee with annual compensation of $182,385 or more in 2024
If you had more than $8,511,281 in annual payroll expenses in 2023, pay the tax on each employee’s wages over $182,385.
The 2024 payroll tax rates range from 0.746% to 2.557% and are subject to change annually. The highest tax only applies to companies with $1,215,897,244 or more in payroll expenses and only on employee earnings of $486,359 or more.
Take a look at a breakdown of the new Seattle payroll tax:
| Business Annual Payroll Expenses | Annual Employee Compensation $0 – Less Than $182,385 | Annual Employee Compensation $182,385 – Less Than $486,359 | Annual Employee Compensation $486,359 or More |
|---|---|---|---|
| Less Than $121,589,724 | N/A | 0.746% | 1.811% |
| $121,589,724 – Less Than $1,215,897,244 | N/A | 0.746% | 2.024% |
| $1,215,897,244 or More | N/A | 1.492% | 2.557% |
Who is exempt from the JumpStart Seattle tax?
There are a number of businesses exempt from this new tax. The following do not have to pay into the JumpStart tax:
- Businesses with annual compensation of less than the threshold
- An independent contractor whose compensation is included in the payroll expense of another business
- Any business engaged in business in Seattle as a grocery business
- Businesses that are preempted from taxation by cities under federal or state statutes or regulations (e.g., federal, state, and local government entities)
For more information about whether you must pay the new tax, check out Seattle’s website.
When is the JumpStart payroll tax due?
Employers must pay the tax on a quarterly basis.
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This article has been updated from its original publication date of January 27, 2021.
This is not intended as legal advice; for more information, please click here.
