EVERETT – For the first time in 24 years, the city’s Business & Occupation tax could be substantially revamped in an effort to increase taxes on bigger business and provide modest tax relief to smaller businesses–including restaurants, bars and retail.
Not since 2002 has the Everett City Council adjusted the B&O tax rates this broadly and the proposed $3.4 million annual tax package hinges on two timely economic factors impacting the city.
One of those factors is a recent business owners survey conducted during the summer that was peppered with concerns about the cost of doing business in the city. The other is a proposed $120 million sports and concert venue known as the Everett Outdoor Events Center.
According to the city’s own data, surveyed business owners reported that 87% said “broad coast pressures” and their “cost of doing business had become more challenging over the previous two years”.
The Washington Hospitality Association is supporting Everett’s proposed $3.4 million B&O tax package because of the tax break targeted for restaurants and bars. Andrea Reay, director of government relations for the WHA tells the EverettPost.com, “In general, it has never been harder to own and operate a business in Washington state. There are a lot of cost pressures, especially for our industry, and I think a lot of our members are encouraged that the city is acknowledging how critical our industry is to the fabric of the community, both culturally and economically. And doing something to help put a little bit more money back in the pockets of some of the small businesses right at a time when they need it the most.” The WHA represents 6000 businesses in the hotel, restaurant and hospitality industry in the state.
The timing of that tax relief coincides with Everett’s pursuit of the 5000-seat EOEC, which is expected to be the new home of the Aqua Sox High-A minor league baseball team, an affiliate of the Seattle Mariners, and a future home to an as yet un-designated United Soccer League team. The USL is considered a league below Major Soccer League squads like the Seattle Sounders, Vancouver Whitecaps and Portland Timbers. The Aqua Sox current home, Funko Field at Everett Memorial Stadium, is owned by the Everett Public School District and Major League Baseball has deemed that ballpark does not meet its stadium standards for 2026.
The city of Everett says the $3.4 million a year B&O tax adjustment “would also invest in the proposed Outdoor Event Center” and “more activity downtown means more customers for nearby businesses, more reasons to visit Everett and additional opportunities for private investment, development and re-development.” Between $2.4 million and $2.9 million of the proposed $3.4 million B&O tax hike would fund the EOEC project.
Everett officials say the proposed EOEC is projected to bring nearly 400,000 visitors to downtown Everett with sports, concerts, festivals or other community activities and generate approximately $85 million each year in business or sales taxes. The EOEC is not expected to be built and opened until sometime in 2027 or 2028. Currently the city is acquiring land east of Broadway Avenue between Hewitt Ave. and Pacific Ave, for the project. A proposal for EOEC timeline and construction is linked here.
The AquaSox ownership group and the USL’s anticipated ownership, which is still being formulated, are expected to sign 30-year leases to play in the EOEC which would pay the city $100 million in lease money and $17 million in upfront capital as anchor tenants in the stadium.
The sales pitch for the EOEC is more sports and music fans spending money in downtown Everett. The proposed $3.4 million B&O tax package is offering a lower tax rate to retail and restaurant owners that would ostensibly capitalize on larger venue traffic for the EOEC.
More customers in Everett are part of the math for the City Council’s proposed B&O tax break for restaurants and retail. The B&O rate for retailers and restaurants would decrease by 25%, from $1 to $0.75 per $1,000 in gross receipts, providing relief to approximately 2,000 retailers and restaurants, according to Everett’s data.
“The average profit margin in Washington state for restaurants is 1.5%,” WHA’s Reay tells the EverettPost.com. “The national average is 4%, and so again, when we’re talking about B&O tax as a structure, it is inherently a regressive tax structure because it is on your gross receipts (not the percent of profit). And when you have high volume, low margin industries like hospitality–and especially our locally owned independent restaurants–it’s tough. So, anything that can create a little bit more predictability, certainty, and cost reduction is a huge help and support for our Industries.”
The Everett City Council is expected to vote on the proposed B&O tax package, dubbed “Everett Forward” at Wednesday’s regularly scheduled 6:30 p.m. meeting. If it passes:
- The annual gross receipts exemption for B&O tax would increase from $20,000 to $250,000, exempting approximately 6,500 businesses from Everett B&O tax.
- The manufacturing B&O rate would increase from $1 to $1.20 per $1,000 in gross receipts.
- Wholesale and services B&O rate would increase from $1 to $1.50 per $1,000 in gross receipts.
- The smallest businesses would also receive licensing relief. Businesses with less than $45,000 in revenue would no longer pay City business licensing or renewal fees.
No opponents have publicly addressed the B&O tax increases on the manufacturing, wholesale or services sectors in the proposal. The service sectors would include accountants, agents, ambulances, appraisers, architects, attorneys, automobile brokers, barbers, baseball clubs, beauty shop operators, brokers, chemists, chiropractors, collection agents, community television antenna owners, court reporters, dentists, doctors, employment agents, engineers, financiers, funeral directors, refuse collectors, hospital owners, janitors, kennel operators, laboratory operators, landscape architects, lawyers, loan agents, map makers, music teachers, oculists, orchestra or band leaders, contracting to provide musical services, osteopathic physicians, physicians, public accountants, public stenographers, real estate agents, school bus operators, school operators, sewer services other than collection, warehouse operators who are not subject to other specific statutory tax classifications, teachers, theater operators, undertakers and veterinarians, and other persons engaging in the business of serving persons.
The complete 21-page B&O tax ordinance can be seen at this link.
Reay applauds the proposed update to the B&O tax brackets. “I think Everett’s really leading with their small business support with this proposal. I do think a lot of other communities and a lot of other lawmakers are looking at the Everett proposal to do the math and see how it might work or impact their community as well. We know we have a challenge in wanting to support our small businesses and being, I would say, predictable and certain in how we do that. And so, while Everett is a leader here, there are a number of other communities that are looking at Everett that could perhaps be a model as we look at what can other communities do? What can the state do to encourage and support small businesses? We know small businesses give so much more back to the community–economically, culturally and socially. And I do think that there’s broad support to help small business. And now, it’s timely to actually start doing that.”
Everett officials crafted the following examples of B&O tax brackets contained within the current proposal. For instance, a small business like a food truck that collects $200,000 or less in annual receipts would now save $200 a year in tax payment to Everett. A retail or small business that collects $500,000 or less in annual receipts would save $125 in B&O tax to the city.
A services company, like a law firm for example, who bills $1 million in annual receipts would pay $500 more in B&O tax to the city. A manufacturing or aerospace supplier billing $10 million annually in receipts would pay $2000 more in city B&O tax.
As the City Council contemplates the weight of the $3.4 million yearly bump in B&O taxes, the city is also facing a projected $7 million budget deficit heading into 2027. The Council is scheduled to pass a new annual budget before the end of the calendar year.