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Poulsbo Council debates raising B&O exemption to ease burden on small firms as state updates tax categories
Summary
Finance staff recommended raising the city's B&O exemption to $125,000 to reduce compliance burden after the state expanded taxable categories; council discussed revenue tradeoffs and equity, and asked staff to return a drafted ordinance to the business agenda for decision.
Council discussed the state's updated model Business & Occupation (B&O) ordinance and a local policy choice Nov. 5, with staff recommending increasing the city—s small-business exemption to $125,000 for most filers to reduce administrative burden and confusion.
Finance staff explained the state model adds several categories as retail taxable items (information-technology subscriptions, website development, live training) and that Department of Revenue guidance continues to evolve. Director Deb (finance) told council the staff recommendation is to equalize the exemptions for retailers and non-retailers at $125,000 and to maintain the city—s maximum rate (0.002). She said staff estimates the revenue impact of raising the exemption would be modest (staff estimated less than $50,000, likely nearer $30,000).
Councilmembers debated tradeoffs. Councilmember Eckert said increasing property taxes to make up revenue is unfair to seniors on fixed incomes; others argued small sole proprietors face disproportionate accounting costs relative to the tax collected. Councilmember Rick raised concerns about returning some businesses to a category that would not contribute, noting the original intent of the tax was to capture activity by businesses that use city services but previously paid no city taxes.
No final vote was taken. Staff said they will present draft ordinance language at the business agenda for council decision in early December.
Quote (staff): "It is the staff's recommendation to put that exemption 125 for both categories and maintain the rate of 0.002," (paraphrased from staff presentation).
