City Business Licenses and Fees

Overview

Most individuals or companies that conduct business in Washington State must obtain a state business license from the Business Licensing Service.

In addition, most cities also require a separate business license in order to legally conduct business within their jurisdiction. For cities, business licenses can serve several different functions, including monitoring business activities operating within the city’s jurisdiction, regulating certain types of business activities to ensure public safety and code compliance, and generating revenue.

Businesses that operate in multiple jurisdictions need to obtain licenses from each of these individual jurisdictions. Businesses have complained that this process is too burdensome, so in 2017 the state legislature adopted EHB 2005 (codified at chapter 35.90 RCW) to address their concerns and simplify the administration of municipal general business licenses. Below is a discussion of key considerations for local governments that adopt or have adopted general business licensing requirements within their jurisdiction.

Legal Authority

The general authority for cities to impose business licenses, fees, and regulations can be found in:

• RCW 35.22.280(32) – First class cities may "grant licenses for any lawful purpose, to fix by ordinance the amount to be paid therefor, and to provide for revoking the same…"
• RCW 35.23.440(8) – Second class cities may "fix and collect a license tax for the purposes of revenue and regulation, upon all occupations and trades, and all and every kind of business authorized by law…"
• RCW 35.27.370(9) – Towns may "license, for the purposes of regulation and revenue, all and every kind of business, authorized by law and transacted and carried on in such town…"
• RCW 35A.82.020 – Code cities may "exercise the authority authorized by general law for any class of city to license and revoke the same for cause, to regulate, make inspections and to impose excises for regulation or revenue in regard to all places and kinds of business, production, commerce, entertainment, exhibition, and upon all occupations, trades and professions and any other lawful activity…"

General Business Licenses and Model Ordinance

RCW 35.90.010(4) defines a "general business license" as "a license, not including a regulatory license or a temporary license, that a city requires all or most businesses to obtain to conduct business within that city."

Any city or town may require a general business license for any person or company "engaging in business" within city limits. This includes businesses that are physically located within the city, as well as businesses that are physically located elsewhere but engage in business within the city. However, cities may not require licenses for entities that are not "engaging in business" within the jurisdiction (RCW 35.90.060).

Many cities charge a flat or tiered fee for general business licenses. These fees are generally designed to recover the administrative costs of registering the businesses, such as issuing the licenses and maintaining the files. The fees charged should be fair and bear a reasonable relation to the costs.

Chapter 35.90 RCW requires all cities and towns with general business licensing requirements to adopt a uniform "model ordinance" identifying what types of commercial activity are and are not subject to business licensing requirements. The provisions of the model ordinance only address general business licensing; they do not address temporary licenses (such as seasonal businesses or special event permits), regulatory licenses (see below), or local business and occupation (B&O) taxes.

However, it should be noted that this is not a comprehensive model ordinance – rather, it consists of just two provisions that must be incorporated into the rest of the city’s business licensing regulations.

The required provisions of the model ordinance were drafted by a committee through the Association of Washington Cities (AWC) and released in June 2018. The committee was comprised of representatives from cities that impose general business license requirements, with input from state and local business associations and chambers of commerce.

The model ordinance has two required components:

• Cities and towns may only impose licensing requirements upon individuals or companies "engaging in business within the city," as defined in the model ordinance. The ordinance also sets forth examples of activities that are considered "engaging in business," as well as business activities that do not require licensing. The definition is based on the model ordinance for B&O taxes.
• For businesses that engage in business within the city but are not physically located within the city, the ordinance establishes a minimum dollar threshold below which the businesses must be partially or fully exempted from licensing requirements. The minimum threshold of business activity in the ordinance is $2,000, although cities may adopt a higher threshold if desired. Below this threshold, cities must either:
  • Exempt these businesses from the licensing requirements entirely, or
  • Require licensing, but at no cost to the businesses.

See the complete text of the model ordinance for the exact language. The model ordinance may not be amended more frequently than once every four years, unless changes are required to comply with new state legislation or court decisions.

Aside from the model ordinance provisions, cities and towns may adopt any other business license provisions as they see fit, including, but not limited to:

• Fees and thresholds (provided that they comply with the model ordinance)
• Approval process and conditions
• License terms and expiration dates
• Penalties
• Suspension, revocation, and appeals
• Exemptions (again, provided that they comply with the model ordinance)

Business License Exemptions

Some cities have chosen to exempt certain business types from general business licensing requirements entirely, or else to require a business license but to charge no fee for the license. Examples include, but are not limited to:

• Nonprofit and religious organizations
• Minors engaged in babysitting, newspaper delivery, lemonade stands, lawn mowing, and similar activities
• Private ambulance operators
• Common carrier delivery of goods and services
• Farmers or gardeners selling their own produce, such as at a farmers market or produce stand (see RCW 36.71.090)
• Businesses below a certain income threshold
• Businesses that only do casual or isolated sales

However, these individuals and businesses may still be subject to state business licensing requirements.

In addition, for out-of-town businesses that engage in business within the city below a minimum threshold as discussed above, EHB 2005 requires cities to exempt those businesses from the business licensing and/or business license fees, as discussed earlier.

Business Licensing Portals: BLS and FileLocal

All cities and towns that require a general business license must partner with the state Business Licensing Service (BLS, part of the state Department of Revenue) to issue the licenses (see chapter 35.90 RCW). The only exceptions are those cities that participated in FileLocal (created by an interlocal agreement between several larger cities in the Puget Sound region) as of July 1, 2020. This means that businesses will be able to obtain local business licenses for any city in the state through BLS and/or FileLocal.

However, all cities and towns retain the ability to set their own business license fees and thresholds with BLS or FileLocal.

Regulatory Business Licenses

Some cities also impose additional regulatory licenses and fees upon certain classes of business that, in their analysis, require additional regulation and oversight for code enforcement or public safety purposes.

RCW 35.90.010(6) defines a "regulatory business license" as "a license, other than a general business license, required for certain types of businesses that a city has determined warrants additional regulation…"

Examples of business types that some cities have chosen to impose regulatory business license requirements upon include, but are not limited to:

• Adult entertainment
• Amusement device operators
• Debt collectors
• Door-to-door salespersons
• Fireworks stands
• Heavy manufacturing
• Home-based businesses
• Live entertainment
• Marijuana-related businesses
• Massage parlors
• Mobile food vendors
• Private ambulance services
• Short-term rentals
• Taxicab and other for-hire vehicle operators
• Towing companies
• Trade show operators

Revenue-Generating Licenses and Head Taxes

Some cities raise revenue by charging business license fees on a sliding scale based on criteria such as number of employees or number of employee hours worked (sometimes known as a "head tax") or the square footage of the business. See the examples later on this page.

Business License Fee Schedules

The vast majority of cities in Washington now partner with BLS. For an overview of the business license fee schedules for all BLS partner cities, see the BLS City Fee Sheet. For more details on a particular jurisdiction, refer to the full interactive BLS list of City License Endorsements.

For information on the 11 cities using the FileLocal system, see the FileLocal website.

Also see the Association of Washington Cities (AWC) Tax and User Fee Survey for additional summaries.

Examples of Revenue-Generating Business License Fees

• Bothell 2024 Business License Fee Schedule – Fee depends on number of employees, plus additional fees for special classifications
• Ellensburg Requirements and Fee Calculations – Five tiers based on number of FTEs
• Lynnwood Municipal Code Table 3.104.050 – Variety of business fees, including fees per employee (divided into two tiers: employees working 14 hours or less per week, and employees working 15 hours or more per week)
• Mill Creek City License – Seven tiers based on number of employees
• Redmond Business Licensing – Sliding fee based on employee hours worked/FTEs
• Richland City License – Fee per FTE, with first two employees exempted
• Sunnyside City License – Five tiers based on number of FTEs

Examples of Business License Webpages

Below are selected examples of city webpages to educate business owners about the local business license requirements.

• Arlington Business License Information
• Granger Business License
• Longview Business License
• Renton Business License Information
• Tacoma Business License Fees – Three tiers based on annual gross income of the business; also includes various regulatory license fees