Effective January 1, 2026, Certain Service Activities Reclassified to Retail

Draft Director’s Rules and Public Hearing

Please visit our Director’s Rules web page for updated rules pertaining to the change from the service classification to retail for certain business activities.

PUBLIC HEARING AND COMMENT: On Tuesday, October 20, 2026, from 10 AM—11 AM Pacific Time (PT), the Office of City Finance will hold a public hearing to consider the proposed rules. The hearing will be hosted on Webex. The City invites all interested persons to present data and provide comments pertaining to the proposed rules, either orally at the hearing or in writing at or before the hearing. You may register for the public hearing regarding amended rules for certain service activities reclassified to retail by clicking this link.

Please mail or deliver written comments to: 

Office of City Finance
Attn: Kevin Guichon, Tax Policy Analyst
License and Tax Administration
700 Fifth Avenue, Suite 4250
PO Box 34214
Seattle, WA 98124-4214
Or via email at: Kevin.Guichon@seattle.gov

As a result of a change in state law, Washington State cities who impose local business and occupation (B&O) taxes amended the Model Ordinance to reclassify certain service activities to retail sales. You may visit the Association of Washington Cities (AWC)s’ City B&O tax rates and business licenses web page for more details.

The City of Seattle codified the amendments to the Model Ordinance’s definition of “sale at retail” by reclassifying the following service activities to retail sales:

Certain Service Activities Reclassified As Retail Sales

  • Advertising services
  • Custom software and customization of prewritten software
  • Custom website development
  • Information technology services
  • Investigation, security and armored car services (not locksmiths)
  • Live presentations
  • Temporary staffing (not hospitals)

(see Ordinance 127353)(2025)

Sourcing Income Derived From Service Activities Reclassified To Retail

With the assistance of the AWC, WA B&O tax cities (cities) have developed guidance to assist taxpayers with sourcing gross income derived from the reclassified retail activities. You may view and download the cities' guidance for sourcing income derived from the reclassified activities by selecting this link.

Certain Service Activities Reclassified to Retail-Application to Existing Contracts

Seattle, along with all Washington State B&O tax cities, will apply city B&O tax to existing contracts consistent with the interim guidance published by the Washington State Department of Revenue. Taxpayers with qualifying existing contracts that were entered into prior to October 1, 2025 may continue to report income derived from the reclassified activities under the service classification until April 1, 2026.

Office of City Finance

Dwight Dively, Director
Address: 700 5th Avenue, Seattle, WA, 98104
Mailing Address: P.O. Box 94669, Seattle, WA, 98124-4669
OCF@seattle.gov

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City Finance manages the financial operations of the City of Seattle and oversees the City’s financial controls and enterprise reporting while working to achieve the goals set by the Mayor and the City Council.