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Council sets business‑and‑occupation code update for second reading; staff says changes required by state law will not change Mercer Island B&O rate
Summary
Finance Director Matt Mornick presented Ordinance 25C‑23 to incorporate state model ordinance updates to the city’s business and occupation (B&O) tax code. Staff said the changes reclassify certain services consistent with state law but will not raise the city’s 0.10% flat B&O rate or expand the tax base for Mercer Island.
Finance Director Matt Mornick briefed the council at first reading on Nov. 4 on Ordinance 25C‑23, which updates the Mercer Island municipal code to reflect a state model ordinance and assign B&O tax classifications created or changed by recent state legislation.
Mornick explained that the Association of Washington Cities convened a work group to update a model ordinance after the state’s recent session (referenced in the packet as "bill 58 14"), which expanded retail sales tax to additional services. Those services now fall into the retailing classification for B&O purposes under the model ordinance. Mornick said Mercer Island applies a flat 0.10% local B&O tax on gross revenues above $150,001 and does not use a tiered classification system. He told the council the proposed ordinance updates the city’s tax classifications to match the model ordinance but does not change the city’s tax rate or expand the local tax base; staff does not expect an impact on local B&O revenues.
Mornick said the revisions would be incorporated into MICC section 4.100.020 and, if adopted on second reading, would take effect Jan. 1, 2026. He also said staff will follow up with the Association of Washington Cities and the Department of Revenue to confirm required municipal‑code updates are complete. Council voted unanimously to set Ordinance 25C‑23 for second reading and adoption.
