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

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.

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

Jamie Carnell, 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.