This evening, the Everett City Council voted unanimously to rewrite the city's Business and Occupation (B&O) tax for the first time in twenty-four years. The package, which the Franklin administration calls Everett Forward, takes effect on January 1, 2027.
The headline is a new $250,000 revenue threshold which means any small businesses earning less than that each year won't owe the city any B&O taxes. The old threshold, established in 2002, was $20,000. The city estimates about 6,500 of its roughly 9,500 registered businesses will fall under the new line.
Businesses above that line, most of them in the service and wholesale sectors, will pay more in B&O taxes, and the city expects to bring in about $3.5 million more per year. Most of the new revenue is earmarked for the downtown stadium.
The $250,000 Line
Washington State's B&O tax is based on gross receipts, not profit. A business owes tax on every dollar it earns, whether or not it made money that year. At the state level, the threshold is $250,000 as of July 1 - it was previously $125,000. Everett-based food trucks, weekend market vendors, and freelancers working from a kitchen table might not have owed the state any money, but they owed the city of Everett - even if they never turned a profit. That changes next year.
The city also raised the threshold at which a business must pay its annual license fee, from $5,000 in receipts to $45,000, saving Everett's smallest businesses even more money and the hassle of any paperwork.
Who Pays Less, Who Pays More
For 24 years every Everett business paid the same rate: $1 for every $1,000 in gross receipts, or 0.1 percent. The new code splits that into three tiers. Retail and restaurants now pay $0.75 cents for every $1,000 - meaning a 25 percent reduction. Manufacturing now pays $1.20 - a 20 percent increase. And services and wholesale pay $1.50 - a 50 percent increase.
Retail is the largest business category in the city, and Deputy Mayor Mike Fong said it was chosen for a cut due to thin margins. The city estimates about 2,000 retailers and restaurants above the $250,000 line will see reduced tax bills. The Washington Hospitality Association backed the package because of the restaurant cut. A restaurant making $1.5 million a year pays the city $1,500 this year but only $1,125 next year - in addition to state B&O taxes.
This means it'll be cheaper for downtown restaurants, shops, and bars to operate. Meanwhile, it will be slightly more expensive for accountants, designers, and tech firms - but most are small enough to fall under the $250,000 line, which is the tradeoff the council made.
Where the $3.5 Million Goes
Today, every B&O dollar goes into the general fund, where it makes up about 13 percent of the funding for police, fire, parks, and libraries. The new revenue, about $3.5 million a year by the city's estimate, will be placed in a separate subfund which can only be spent on economic development and business support. The council will have to approve each allocation separately.
The city has already said how it wants to spend most of it. About $300,000 is slated to seed an annual grant program for commercial districts, paying for events, storefront improvements and marketing. As much as $2.9 million a year is pencilled in for the new downtown stadium that would house the AquaSox and possibly a United Soccer League team. The money would cover bond payments on the project for as long as the bonds last, and after that it would fund other economic development work. The stadium's latest cost estimate is about $120 million.
Over the summer, city staff ran an online survey, held small-business roundtables, and visited over 100 businesses across Everett. In the resulting report, 87 percent said the cost of doing business had become harder over the past two years, and taxes and fees ranked as the single biggest burden. Asked what the city could do, owners put lower costs and fees first, then simpler permitting, then public safety, then marketing.
The new rates and thresholds apply to receipts earned from January 1, 2027. Businesses which file quarterly will see the change on their first 2027 return, due in April.