Seattle Agrees – No Sales Tax on Construction Retainage Bonds

By Jerry Dinndorf AGC Seattle District Manager

Thanks to the due diligence of Mike Pellitteri PELLCO Construction and a legal assist from Tymon Berger Ashbaugh Beal the City of Seattle reversed its long standing policy of charging sales tax on retainage bonds.

Mike questioned the appropriateness of the practice arguing that he has not been required to pay the tax when performing public work for other municipalities. After waiting for more than two months for an answer he requested AGC assistance.

AGC consulted with Tymon who provided a Department of Revenue (DOR) Advisory that made it very clear that public agencies should retain only the statutory percentage of the contract price and not any percentage of sales tax.

AGC forwarded the information to the City with a short note and the City promptly replied that were changing their policy. The City has now posted the DOR guide on its website so future contractors performing work for the City will have a clear guideline.