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SECTION III. - CITY, STATE AND FEDERAL TAX REQUIREMENTS
City of Seattle Tax Requirements
From the inception of your business, you should employ the services of a licensed tax professional to guide you through the exciting world of tax liabilities. Brief descriptions of local tax liabilities that may affect nightlife businesses are listed below.
Detailed information about these or any other City of Seattle taxes, along with information on tax exemptions, can be found online in the Guide to Seattle’s Business License & Taxes at: www.seattle.gov/rca/taxes/taxmain.htm. This information should always be confirmed by consulting your tax professional.
PLEASE NOTE: Failure to pay any required City of Seattle tax may result in suspension or revocation of your Seattle business license: Pursuant to Seattle Municipal Code, DEA has the authority to suspend or revoke any licensee that is in default of any payment of a license fee or tax. Unlawful acts or failure to comply with the provisions of SMC Title 5 and SMC Title 6 may lead to penalties including but not limited to license suspension, revocation and/or civil penalties or criminal prosecution. The authority to suspend or revoke a business license is defined in SMC 5.55.230
For questions about any of the City of Seattle tax requirements, contact the DEA at (206) 684-8484 or by email at: firstname.lastname@example.org.
Business License (B & O) Tax
Nightlife establishments that engage in business within the City of Seattle are subject to the Business License Tax (B & O Tax) pursuant to SMC 5.45.050. If gross receipts do not exceed $80,000 in a calendar year, no business license tax is due. If gross receipts exceed $80,000 in a calendar year, the business license tax is levied at proscribed rates. A business license tax form must be filed whether or not tax is due. For classifications and rates, please visit http://www.seattle.gov/rca/taxes/Classifications.htm. Revenue from the B & O tax is distributed to the City’s General Fund which funds basic City services, such as police, fire, libraries, and parks.
Nightlife entertainment establishments that charge a fee, cover charge or ticket price for admission including complimentary tickets, are required to pay the 5% admission tax. Admission tax is often overlooked by business owners, resulting in significant penalties. It is in your best interest to educate yourself, your staff and your event promoters on these requirements. Admissions tax is paid by the customer, to be held in trust by the person/promoter collecting the admission charges, and paid to the City as provided by law, pursuant to SMC 5.40.020 H.
A copy of the rule on approved methods of counting, record keeping, tracking of complementary admissions, and clarification on responsibility to collect and remit is attached as Appendix I Ultimately, you as the business owner are responsible for payment. Consult your tax advisor to find out if you qualify for an exemption from this particular tax pursuant to SMC 5.40.025.
PLEASE NOTE: There are very specific restrictions on collecting admissions or donations for benefit shows or events, fundraising events, and/or non-profit sponsored events. According to Seattle Municipal Code, “It is unlawful for any person to request a donation or contribution that effectively represents an admission charge at any event unless the event is held by an exempt organization pursuant to SMC 5.40.025. Donations or contributions requested by such organizations that would otherwise be subject to the admission tax… are not subject to the tax; provided, that people are admitted or allowed to remain in attendance without payment of such donation or contribution and the signage, invitation, advertisement, notice or other literature related to the event contains a statement, conspicuously posted, that such donation or contribution is not required for the privilege of entering, attending, or remaining in attendance at the event.” (SMC 5.40.020(J))
Exempt organizations such as non-profits must be licensed and recognized by the City, and they must obtain a certificate of exemption from DEA prior to the event. As the business owner, you are responsible for ensuring that any benefit/fundraising/non-profit sponsored events have obtained the appropriate exemption from DEA. Otherwise, you may be held responsible for paying the admissions taxes.
In 2009, the Live Music Venue Admissions Tax Exemption went into effect. A venue can qualify for this exemption by meeting all of the following requirements:
- A premise or location with a certificate of occupancy of 999 or less; and
- Hosting or presenting live music on at least 3 separate days per week on a regular schedule; and
- Hiring one or more musicians to perform the equivalent of sixteen individual performances per week; and
- Is current with all City of Seattle license and tax requirements; and
- Has not obtained more than three violations of law concerning public health, public safety, noise, licensing, taxing or permitting related to the ownership, possession, occupation, operation, use or maintenance of the location or premises. A venue that has had more than three violations in any twelve (12) month period shall be ineligible for a certificate of exemption for a period of one year from the date of the last violation.
For general information regarding the admissions tax, and instructions on how to obtain a Certificate of Registration or Certificate of Exemption, please visit http://www.seattle.gov/rca/taxes/ADMITAX/AdmissionsTax.htm or contact the Revenue and Consumer Affairs information number, (206) 684-8484 and request an Admissions Tax Inspector. The admissions tax is applied to the General Fund, with 20% annually distributed to the Office of Arts and Cultural Affairs.
Employee Hours Tax (Repealed)
Seattle Ordinance 123150 repealed the Seattle Employee Hours tax effective January 1, 2010. Businesses and other organizations must still file outstanding Employee Hours Tax returns for periods prior to 2010. Employee Hours Tax filings are available online at Seattle Ordinance 123150 repealed the Seattle Employee Hours tax effective January 1, 2010. Businesses and other organizations must still file outstanding Employee Hours Tax returns for periods prior to 2010. Employee Hours Tax filings are available on line at https://dea.seattle.gov/self/.
Between July 1, 2007 and January 1, 2010, Nightlife establishments that engaged in business within the Seattle city limits were subject to the employee hours tax. The employee hours tax was in addition to the City's business and occupation tax. Calculation of the tax was based upon the number of employee work hours performed within the Seattle city limits. To learn more regarding the employee hours tax, rates, computation, tax credits and exemptions visit: http://www.seattle.gov/rca/taxes/EmployeeHoursTax.htm.
Square Footage Tax
The square footage business tax applies to businesses located in Seattle and is based on the amount of square feet used to conduct business activities. The square footage business tax is computed by applying tax rates against the square footage of a business. All businesses located within Seattle that are subject to the business license tax will be subject to the square footage business tax. However, Seattle businesses that do not ship goods or provide services outside of Seattle are entitled to a 100% credit of the square footage tax. This would include Seattle businesses such as restaurants, banks, barbershops. Consult your tax professional, and find information on the square footage tax, rates, computation, tax credits and exemptions at: http://www.seattle.gov/rca/taxes/SquareFootageTax.htm. Like the B & O tax, revenue from the square footage tax is distributed to the City’s General Fund which funds basic City services, such as police, fire, libraries, and parks.
Any nightlife establishment intending to conduct any amusement games, bingo and raffles, punch boards and pull tabs, and social card games or any other gambling activities must register for gambling activity with DEA, Revenue and Consumer Affairs Division prior to commencement of such activity pursuant to SMC 5.52. Details can be found online at http://www.seattle.gov/rca/taxes/GamblingTax.htm. Revenue from the gambling tax is also distributed to the City’s General Fund.
Reminder: You must also register gambling activity with the State Gambling Commission. See Section II, Licenses.
Business improvement areas [BIA]
A BIA provides a source to fund improvements in neighborhood business districts by assessing property and/or business owners who benefit from the improvements. BIA funds can be used for services such as parking, joint marketing, cleanup and maintenance, security, special events, beautification, and management and administration. The City contracts with an agency to manage each BIA and each BIA has a ratepayer's advisory board. The City collects the assessments and reimburses the Agency for BIA expenses.
Currently, BIAs are operating in Broadway/Capitol Hill, West Seattle, International District/Chinatown, Pioneer Square, University District, and the Downtown Seattle Association.
WA State Tax Requirements
For information on State Business Taxes including classifications, rates, filing & reporting, frequencies & due dates, deductions, late fees, etc., visit the State Department of Revenue website at http://dor.wa.gov/content/home or contact them at 1-800-647-7706. Be sure to consult your tax professional as well.
Federal Tax Requirements
For information on Federal Taxes including classifications, rates, filing & reporting, frequencies & due dates, deductions, late fees, etc., visit the IRS website at www.irs.gov/businesses/index.
You can also consult the IRS Small Business and Self-Employed One-Stop Resource, online at http://www.irs.gov/businesses/small/index.html. Again, be sure to consult your tax professional.
Notify all licensing/permitting departments, and comply with departmental requirements regarding change of ownership, change of location, additional business locations, and change of business name.
You are well on your way to growing
a successful nightlife business in Seattle.
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