House Bill 2097 (HB 2097), introduced in the 2025-26 legislative session by Representatives Scott, Doglio, and Peterson, seeks to authorize Washington counties to impose a local Business and Occupation (B&O) tax on gross receipts, gross income, or the value of products. Municipalities have had similar authority for years, but HB 2097 represents a significant increase in business taxes for businesses operating in Washington.
This measure, which would take effect January 1, 2027, allows counties to collect tax revenue for services like behavioral health, public safety, transit, and waste management.
The bill includes a ridiculously low mandatory minimum small business exemption threshold of $20,000 in annual gross income and a tax rate of 0.0020 with increases requiring voter approval. The rate might look small, but remember the tax is applied on business gross revenue. It still represents a significant new tax layer on businesses already grappling with Washington's high regulatory and tax environment.
The negative impacts on businesses are clear. First, the tax is measured by gross receipts, not profits, meaning companies pay regardless of profitability, a particularly harsh hit on small and marginal operations in high-cost areas. Businesses must navigate complex allocation and apportionment rules for multi-county activities, including sales at delivery points and services based on payroll and customer location factors, increasing compliance costs through detailed record-keeping, reporting (monthly, quarterly, or annual), and potential audits.
Penalties and interest align with state RCW 82.32 provisions, adding financial risk for errors in calculation or filing. Although a model ordinance process involves stakeholder input, including business associations, the bill empowers counties to adopt variations, potentially leading to a patchwork of local taxes that complicate operations for businesses spanning jurisdictions.
Requiring voter referendums for initial imposition or rate increases offers some protection, but the overall effect is to shift more tax burden onto the private sector amid rising operational costs, inflation, and economic uncertainty.
It's another burden that discourages job creation, investment, and growth. Lawmakers should prioritize spending restraint over new taxes that penalize entrepreneurship.