AWC worked with a group of cities to propose an update to the business license minimum threshold for out-of-city businesses. After feedback from the business community, a draft of the model is now available, which cities would need to adopt by January 1, 2026. The threshold has not been updated since cities with business licenses adopted it in 2019.

The final proposal includes the following changes:

• A one-time increase to a higher threshold to $4000 for out-of-city businesses, effective January 1, 2026. Under model ordinance statute, cities must adopt the change with the same effective date.
• Every four years thereafter, the threshold would have an automatic periodic increase based on cumulative inflation.
• The rates of inflation would be calculated using the Consumer Price Index-U (CPI-U) Western for June of each year compared to the previous year for the previous four years.
• The rate of inflation would be calculated as zero in any year in which inflation was negative and capped at 5% per year or 20% over four years if inflation exceeded those amounts.
• To make the threshold easier to administer, the cumulative inflation amount would be rounded to the nearest $100.
• Cities would retain the local option of requiring a no-fee registration for out-of-city businesses below the threshold and the local option of imposing a higher threshold than the model minimum threshold.
• Cities that partner with the state’s Business License Service would need to update their ordinance in time to provide 75-days' notice to the Department of Revenue of the change.

AWC is planning to provide education and a fact sheet for cities early next year so that cities can complete the update in time to meet the deadline. A copy of the draft update is available here.

Work group finalizing update to model business license threshold

September 6, 2024

After input from cities and the business community, the city work group is close to finalizing an update to the business license minimum threshold for out-of-city businesses, which cities would need to adopt by January 1, 2026. The threshold has not been updated since cities with business licenses adopted it in 2019.

The final proposal would include the following changes:

• A one-time increase to a higher threshold to $4000 for out-of-city businesses, effective January 1, 2026. Cities that partner with the state’s Business License Service would need to update their ordinance in time to provide 75-days' notice to the Department of Revenue of the change.
• Every four years thereafter, the threshold would have an automatic periodic increase based on cumulative inflation. The rate of inflation would be calculated as zero in any year in which inflation was negative and capped at 5% per year or 20% over four years if inflation exceeded those amounts.
• The rates of inflation would be calculated using the Consumer Price Index-U (CPI-U) Western for June of each year compared to the previous year for the previous four years.
• To make the threshold easier to administer, the cumulative inflation amount would be rounded to the nearest $100.
• Cities would retain the local option of requiring a no-fee registration for out-of-city businesses below the threshold and the local option of imposing a higher threshold than the model minimum threshold.

AWC will provide draft model ordinance language and education materials once the work group completes its work.

Provide feedback on proposed change to model business license threshold

July 12, 2024

The city work group reviewing the business license minimum threshold for out-of-city businesses needs your feedback on proposed changes to the threshold. The threshold has not been updated since cities with business licenses adopted it in 2019.

After input from the business community last month, the work group is considering a proposal that would include the following changes:

• A one-time increase to a higher threshold to $4,000 for out-of-city businesses.
• Combined with an automatic periodic increase four years later based on cumulative inflation. The rate of inflation would be calculated as zero in any year in which inflation was negative and capped at 5% per year or 20% over four years if inflation exceeded those amounts.
• The rates of inflation would be calculated using the Consumer Price Index-U (CPI-U) Western for June of each year compared to the previous year for the previous four years.
• To make the threshold easier to administer, the cumulative inflation amount would be rounded to the nearest $100.
• While the workgroup has been considering recommending that the change take effect on January 1, 2025, it is considering whether it would be more feasible if the change took effect January 1, 2026. Cities that partner with the state’s Business License Service would need to update their ordinance in time to provide 75-days' notice to the Department of Revenue of the change.
• Cities would retain the local option of requiring a no-fee registration for out-of-city businesses below the threshold and the local option of imposing a higher threshold than the model minimum threshold.

If you have feedback for the work group, please contact Sheila Gall.

Potential updates to city model business license minimum threshold

June 8, 2024

Picking up on work that began last summer, a work group of cities has begun meeting to review the business license minimum threshold for out-of-city businesses that cities with business licenses were required to adopt by January 1, 2019.

The work group is considering a one-time increase to a higher threshold, possibly to $3000, which could also be combined with an automatic periodic increase two to four years later based on inflation and rounded to the nearest $10 or $100. If a higher threshold is agreed upon by the workgroup, it would likely take effect on January 1, 2025, and cities that are partners with the state’s Business License Service would need to update their ordinance in time to provide 75-days' notice to the Department of Revenue of the change.

The last threshold was created in 2018 in a model ordinance process required by legislation (RCW 35.90.080), in part to respond to concerns of businesses concerns about licensing requirements for out of city businesses delivering goods on an infrequent basis using their own vehicles. The final 2019 business license threshold for out-of-city businesses was set at $2,000 per year, with an option for cities to require no-fee registration only for out-of-city businesses below the threshold. Cities also had the option to create a higher threshold if they chose. The threshold was adopted by all business license cities with a January 1, 2019, effective date.

The statute provided the model minimum threshold cannot be updated more frequently than every four years, and cities made a commitment to review the level every four to five years to see if the level created in 2019 is still working for cities and their out of city businesses. AWC recently met with the business community to discuss potential updates to the model license threshold for out-of-city businesses. They have been requesting that cities consider a business licensing threshold of $5,000 to $10,000 per year for out-of-city businesses.

If you have feedback for the work group or would like to participate in future monthly meetings, please contact Sheila Gall.