Seattle voters approved Proposition 2 in November 2025, and the city’s revised business and occupation (B&O) tax took effect January 1, 2026. The change raises the threshold for paying the tax from $100,000 to $2 million in gross receipts, adds a separate $2 million standard deduction, and temporarily increases rates in two categories. It is a mix of potential relief for smaller businesses and higher taxes on some taxable receipts—not simply a tax hike for large companies.
How Seattle’s B&O tax measure fared at the ballot box
The City Council passed the proposal on August 4, 2025, and referred it to voters as Proposition 2. In the November 4, 2025 general election, voters approved it: 190,555 voted yes (70.97%) and 77,958 voted no (29.03%), according to King County Elections’ official final results. The measure required a simple majority.
What changed in the B&O tax
Seattle’s B&O tax is based on gross receipts, not net profit. Proposition 2 changed the threshold, added a separate deduction, and raised rates in two categories for a limited period. The ordinance and ballot materials describe the following schedule:
| Provision | Before the change | Under Proposition 2 |
|---|---|---|
| Threshold for paying B&O tax | $100,000 in gross receipts | $2 million |
| Standard deduction | No separate $2 million deduction stated in the ballot materials | Separate $2 million standard deduction |
| Rate category with prior rate 0.00222 | 0.00222 | 0.00342 through 2032; 0.00273 beginning in 2033 |
| Rate category with prior rate 0.00427 | 0.00427 | 0.00658 through 2032; 0.00526 beginning in 2033 |
The rates are B&O rates applied to taxable gross receipts, not percentages of profit. The ballot materials list the rates and changes but do not establish a single tax bill for every business; the amount owed depends on the business’s applicable category and taxable receipts. The ordinance and ballot text set out the measure’s provisions.
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When the $2 million threshold started—and what it means
The city says the changes took effect January 1, 2026. Its guidance says a business with less than $2 million in annual taxable revenue may owe no B&O tax for that calendar year. The threshold and the standard deduction are separate provisions; they should not be treated as a single allowance. For a business close to the threshold or with questions about its category or deduction, consult the City of Seattle’s current business-tax instructions.
Businesses below the threshold
Smaller businesses may pay less or no B&O tax under the higher threshold and deduction. The City’s August 2025 announcement projected that the proposal would lower city taxes for approximately 90% of businesses then paying B&O tax. That was a City projection, not a measured post-implementation result.
Businesses with taxable receipts
Businesses above the threshold may still owe tax, and taxable receipts in the two affected rate categories face higher rates through 2032. A gross-receipts tax can weigh differently on businesses with thin and thick margins: two businesses with similar receipts can have different profits, but the tax base is receipts rather than profit.
Do businesses still have to file if they owe no tax?
Yes. Seattle says businesses must file and report annual gross revenue even if they owe no B&O tax or had no business activity. The city’s business-tax page provides current filing instructions and details for individual cases.
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Why supporters and opponents disagreed
Supporters framed Proposition 2 as a way to reduce taxes for many small and neighborhood businesses while raising revenue for public services. The ordinance identifies housing, human services, workforce, and small-business support among the purposes for additional revenue. The Seattle City Council’s 2025 annual report described $90 million in projected new revenue; that figure is a projection, not an audited post-implementation total. The City also said the changes would help protect essential services in its August 4, 2025 announcement.
Opponents argued in the official voters’ guide that higher rates could make Seattle less competitive, threaten jobs, and burden businesses with low profit margins because the tax applies to gross receipts. Those are arguments about possible effects, not established outcomes. The official ballot measure page includes the arguments for and against Proposition 2.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What the vote means for Seattle businesses now
The election settled whether the approved changes would take effect; they are now in force. For businesses, the practical questions are their annual taxable revenue, applicable B&O category, and filing obligations. The policy combines relief aimed at smaller businesses with temporary higher rates in two categories, while the effects on actual business costs and city revenue depend on implementation.
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