Seattle Payroll Expense Tax

The City of Seattle, Washington will impose a new employer-only Payroll Expense Tax effective 1 January 2021. The filing of this tax was optional until Q4 2021and Zenefits is supporting this tax starting Q4 2021. The full amount due for 2021 must be paid by January 31, 2022. This tax applies to businesses operating in Seattle (with some exceptions). An employer is subject to this tax if they paid at least $7 million in annual payrolls in their previous year, and they have at least one employee with an annual compensation of $150,000 or more.

More detailed information is available here.

Setup

The agency will look back at the prior tax year to determine which employers are exempt/non exempt from this tax in 2021, and the tax rate is dependent on the current year’s employee compensation of at least $150,000.

	Current year’s total payroll expense of less than $100 million	Current year’s total payroll expense of $100 million or more, but less than $1 billion	Current year’s total payroll expense of $1 billion or greater
Total annual payroll expense for employees who have annual compensation of $150,000 to $399,999.99 in the current year	Rate = 0.7%	Rate = 0.7%	Rate = 1.4%
Total annual payroll expense for employees who have annual compensation of $400,000 or more in the current year	Rate = 1.7%	Rate = 1.9%	Rate = 2.4%

This tax is paid to the City of Seattle and will require that businesses have an account with this agency. You’ll need to provide the following information in the Tax Settings of your Payroll app in Zenefits.

Unified Business Tax ID (UBI)
Subjectivity Selection

This is an employer level tax calculation and there are no employee withholdings.

The tax rates are based on the amount of the business’ annual Seattle-based payroll expense and the amount of annual employee compensation of at least $150,000.

If the current year’s total payroll expense is less than $100 million,

Rate = 0.7% of total annual payroll expense for employees who have annual compensation of $150,000 to $399,999.99 in the current year
Rate = 1.7% of total annual payroll expense for employees who have annual compensation of $400,000 or more in the current year

If the current year’s total payroll expense is $100 million or more, but less than $1 billion,

Rate = 0.7% of total annual payroll expense for employees who have annual compensation of $150,000 to $399,999.99 in the current year
Rate = 1.9% of total annual payroll expense for employees who have annual compensation of $400,000 or more in the current year

If the current year’s total payroll expense is $1 billion or greater,

Rate = 1.4% of total annual payroll expense for employees who have annual compensation of $150,000 to $399,999.99 in the current year
Rate = 2.4% of total annual payroll expense for employees who have annual compensation of $400,000 or more in the current year

More details in this internal documentation