City of Seattle's Employee Hours Tax

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What is the employee hours tax?

Effective July 1, 2007, the City of Seattle (“City”) imposed an employee hours tax (hereinafter referred to as the “Head Tax”) on companies engaged in business activity within the City (Seattle Municipal Code 5.37, et. al.) . Calculation of the Head Tax is based upon the number of

employee work hours performed within the Seattle city limits and it is in addition to the City’s business and occupation tax. Vacation and sick leave hours are excluded from the calculation. There is a deduction allowed for hours worked by employees who commute to work at least 80

percent of the time by other than single-occupancy vehicles (“Commuter Deduction”).

What is the purpose of the Head Tax?

Revenue from the Head Tax will be used exclusively by the City to fund the maintenance and improvement of local transportation infrastructure.

What is the applicable Head Tax rate?

The Head Tax rate is $0.01302 per employee hour. Taxpayers may use the alternative computation method of $25 per year for each full-time equivalent ("FTE") employee. For 2007

only, businesses should calculate the amount of the Head Tax based only on employee hours worked from July 1 to December 31. For example, the 2007 tax amount for each FTE is $12.50. All businesses that report the Head Tax will receive a tax credit of up to $50 on the amount of the Head Tax due; however, the amount of the tax credit may not exceed the total Head Tax due.

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Published In: Labor & Employment Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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