This article is the second part of a short series explaining the basics of a margin tax and how it compares to Washington’s B&O tax. Although a margin tax might seem more fair because it considers some business costs, it doesn't mean it is simple. In fact, one major concern is that it could make the tax system more complicated for employers.

Washington’s B&O tax is often criticized, but its basic structure remains straightforward. It taxes gross receipts based on the business classification. A margin tax typically involves more calculations because the business must identify eligible costs, select the deduction method, and determine its taxable margin. This often results in increased recordkeeping, additional accounting support, and more time spent on compliance.

This is especially important for small businesses. A small firm might benefit from a lower tax burden if its margins are thin, but it could also face a more complicated filing process. For some owners, the extra paperwork and complexity might outweigh the tax savings. In other words, a margin tax might fix one problem but create another.
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The main lesson for Washington businesses is that how a tax is structured matters more than what it's called. A margin tax could benefit some companies, especially those currently taxed heavily on gross receipts, but it wouldn't benefit all businesses equally. The next article in this series will examine the larger policy question: what happens if Washington actually eliminates the B&O tax and replaces it with a margin tax.

This article is the first in a short series comparing a margin tax with Washington’s Business & Occupation (B&O) tax. The goal is to help business owners understand the basic concept before exploring the tradeoffs. Generally, a margin tax differs from the B&O tax because it taxes a business after certain cost deductions are allowed, while the B&O tax is based on gross receipts.

That difference matters because Washington’s B&O tax can be applied even when a business has very little profit left. A company might seem to have strong sales on paper, but after paying wages, rent, materials, fuel, and other operating costs, the actual profit could be much lower. A margin tax is often discussed as an alternative because it aims to better reflect a business’s actual financial situation instead of taxing all revenue.

For some businesses, that can be quite advantageous. Companies with high revenue but narrow profit margins—such as retailers, manufacturers, wholesalers, contractors, and certain agricultural businesses—might find a margin tax more sensible than a gross receipts tax. Small businesses in these sectors often face pressure when taxes are based on sales rather than on what they actually keep.
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In simple terms, supporters of a margin tax often argue that it more accurately reflects the true cost of doing business. This doesn't mean it is always better, but it explains why the idea often comes up in tax policy discussions. In the next article in this series, I will explore the other side of the debate: how a margin tax can also create new problems, especially regarding complexity, compliance, and varying impacts across industries.

Thanks to everyone that made it out to a great ribbon cutting at The Towns on Elm! You can check them out at 212 N. Elm St., Kennewick, WA 99336

​Affordable housing is a growing problem in Washington. When workers cannot afford to live near their jobs, employers struggle to hire and retain employees, and communities experience increased pressure on roads, services, and growth. Inclusionary zoning offers one way for local governments to tackle this issue by requiring or encouraging developers to include affordable homes in new residential projects.

In Washington, inclusionary zoning can be either voluntary or mandatory. Voluntary programs offer benefits such as increased density, reduced parking requirements, fee waivers, or faster permit reviews in exchange for affordable units. Mandatory programs require affordable housing in specific developments, often in areas where additional housing capacity has already been approved. Some programs also allow developers to pay a fee instead of building the units on-site.

State law provides the foundation for these programs. Under RCW 36.70A.540, cities and counties planning under the Growth Management Act can create affordable housing incentive programs. Usually, rental units must serve households earning up to 50 percent of the county median income, while ownership units must accommodate households earning up to 80 percent. These units are required to stay affordable for at least 50 years.

Several cities in Washington, including Redmond, Bellevue, Kirkland, Tacoma, Sammamish, Bothell, Issaquah, Kenmore, Marysville, and Federal Way, have adopted this approach. Their programs demonstrate that inclusionary zoning can be tailored to meet local needs and housing market conditions.

However, this isn’t an easy solution. Inclusionary zoning generally works best in strong housing markets where development stays financially feasible. If requirements are too strict, they can hinder new construction. That’s why local governments need to carefully design these programs and find a balance between affordability goals and market conditions.
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For businesses, this issue is important because housing impacts workforce stability, commuting patterns, and long-term economic growth. When implemented effectively, inclusionary zoning can help communities expand their housing options while strengthening the local economy.

Thanks to all who came to our Legislative Wrap-Up Luncheon on 4/22!

Washington’s sales tax system may seem simple, but the money collected from each sale is divided among different levels of government. For businesses, the main point is clear: sales tax rates are not just numbers on a receipt. They reflect state and local policy choices that can influence compliance, business operations, and the overall cost of doing business in Washington.

The state receives 6.5 percent of the retail sales tax. Additionally, local governments receive an additional share under a structure determined by state law. Since these local taxes are coordinated across cities, towns, and counties, they don't simply add up within the same jurisdiction. That’s why Washington’s minimum combined sales tax rate starts at 7.5 percent.

Rates above that level usually result from additional local taxes approved for specific purposes such as transportation, public safety, criminal justice, housing, behavioral health, and public facilities. Transit districts and other special-purpose districts might also add their own sales tax components. Consequently, rates can differ significantly from one city to another.

That matters for businesses, especially those with multiple locations or customers in different jurisdictions. In areas like the Tri-Cities, local rate differences can reflect investments in transit, public safety, and community amenities. For business owners, sales tax isn't just a compliance issue; it also demonstrates how local communities fund services and infrastructure that support growth and commerce.

The main point is that Washington’s sales tax system acts both as a source of revenue and as a reflection of public policy. Understanding how these components work can help businesses stay compliant, plan more effectively, and better evaluate the markets in which they operate.
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For a deeper review of the topic, readers can return to the original article, MRSC - Where Do Our Sales Taxes Go?

Thanks to everyone who joined us for a beautiful, sunny, business after hours with Water2Wine Cruises! ​

​Eminent domain is one of the government’s most powerful tools because it allows the government to take private property for public projects. In Washington, the goal is to balance two important principles: strong property rights and the need to build roads, utilities, and other public infrastructure. The rules are clear: the project must serve a true public purpose, the owner must receive fair compensation, and the process must go through the courts.

Eminent domain is the government’s power to take private property for public use. The legal process is called condemnation, which may involve taking all or part of a property, or just a limited right like an easement. Washington courts do not simply rely on a government label; they must be able to determine that the use is genuinely public.

Washington’s Constitution imposes strict limits. It generally prohibits takings for private use, with narrow exceptions such as private ways of necessity and certain drainage or ditch work for agricultural, domestic, or sanitary purposes. It also requires that compensation be paid in advance or deposited into court for the owner, and it makes whether a use is public a question for the courts to decide.

Most of the time in Washington, eminent domain has been used for essential public infrastructure such as streets, highways, bridges, water systems, sewer and drainage systems, parks, and public buildings. These purposes are detailed in state law. The biggest controversies usually occur when eminent domain is connected to redevelopment or “economic development,” especially after the U.S. Supreme Court’s Kelo decision in 2005 raised concerns nationwide about taking property for projects that mainly benefit private parties.

In real life, local government usually starts with a specific project and a formal decision by the council or commission. They try to buy the property first. If negotiations fail, the government files a case in superior court. The judge first decides whether the project is for public use and necessary, then the court process determines compensation. Washington also has relocation assistance rules to reduce hardship for people or businesses displaced by public projects.
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For businesses and communities, the benefit of eminent domain is that it can enable projects that help everyone, such as safer roads, utility upgrades, flood control, and freight access improvements. The drawback is disruption: forced relocation, construction disruptions, loss of customer access, and uncertainty near the project site. People in Washington generally support eminent domain when the public purpose is clear and limited but distrust it when they believe it might benefit a private interest. The best safeguard is a careful, transparent process that considers condemnation only as a last resort.

• Washington State Legislature. “Washington Constitution, Article I, Section 16: Eminent Domain.”
• Washington State Legislature. “RCW 8.12.030: Condemnation authorized, purposes (cities and towns).”
• Washington State Legislature. “RCW 8.08.010: Condemnation authorized for general county purposes, petition.”
• Washington State Legislature. “Chapter 8.26 RCW: Relocation assistance for persons displaced by public projects.”
• MRSC. “Eminent Domain (Washington overview and resources).”
• MRSC. “Eminent Domain: The Basics (Washington State Association of Municipal Attorneys conference paper).”
• Institute for Justice. “The Potential for Eminent Domain Abuse in Washington (policy brief).”
• Pierce County Charter. “§ 9.80 Eminent Domain.”
• Washington State Attorney General's Office. “Property owners and politicians request limits to land grabs (news release).”
• Library of Congress. “U.S. Reports: Kelo v. New London, 545 U.S. 469 (2005).”
• Seattle Post-Intelligencer. “Condemnation for eminent domain (commentary reflecting public concerns).”

 This article was written with contributions from AI to organize the information and improve its readability.