AGC opposes new legislation, HB 2100, which would impose a payroll tax. Elements of the bill:
- Creates a new employer-paid payroll excise tax on high-wage compensation
- Applies to “large operating companies” that:
- Have more than 20 employees
- Have more than $5 million in gross receipts
- Have a U.S. business presence
- Small business exemption: Employers with less than $7 million in total annual payroll are exempt
- Tax rate: 5%
- What is taxed:
- Only the portion of an employee’s wages above the federal Additional Medicare Tax threshold (generally around $125,000 per employee)
- Credits allowed:
- Employers may claim credits for qualifying city payroll taxes already paid
- Administration & enforcement:
- Requires regular reporting and payment
- Penalties and interest apply for late or unpaid taxes
- Effective timing:
- Tax collection begins mid-2026.
AGC members should pay close attention to this bill, particularly firms with more than 20 employees and annual revenues exceeding $5 million. Should it pass, companies that employ a small number of highly paid individuals may face new costs even if most of their workforce earns below the threshold. Contractors operating in multiple states but maintaining a Washington presence should not assume the tax is limited to local-only businesses. Firms working in cities with existing payroll taxes (e.g., Seattle) will also want to evaluate whether available credits apply. In addition, contractors approaching the $7 million annual payroll exemption should be aware that growth could trigger new tax liability, and those bidding long-term projects may need to account for increased labor costs beginning in 2026.
“This tax does not exist in a vacuum,” AGC Lobbyist said. “It comes on top of rising costs for Unemployment Insurance, Workers’ Compensation, Paid Family and Medical Leave, and recent B&O tax increases from the last session. Taken all together, the Legislature is making it harder for businesses to operate and stay competitive in Washington.”
Click here to sign in CON to tell members of the House Finance Committee to reject HB 2100. (Note: This needs to happen before 12:30 on Jan. 22).
If you have any questions, contact AGC’s Michele Willms.