Reducing Municipal General Business License Confusion

Reducing Municipal General Business License Confusion
Businesses operating within multiple municipalities can find it difficult to comply with the different licenses and regulations. Two bills would alleviate some of that burden, by requiring cities to use the same system when handing out general business licenses. Photo: Jon

Washington employers are often bogged down by the variety of licenses and regulations required to operate within multiple cities. That is what small business owners and advocates said this week during public testimony on SB 5777, which would simplify municipal general business licensing. The measure would add greater consistency across the board by requiring cities to issue permits from the same place. As of Wednesday, February 15, the bill was voted out of committee, and a nearly identical bill, HB 2005, is also gaining traction.

Both bills draw bipartisan support. SB 5777’s prime sponsor is State Sen. Sharon Brown (R-8). She is joined by cosponsors including State Sens. Reuven Carlyle (D-36), Jan Angel (R-26), and Maralyn Chase (D-32). State Rep. Kristine Lytton (D-40) is prime sponsor of HB 2005. The measure’s cosponsors include State Reps. Terry Nealey (R-16), Ruth Kagi (D-32), and Timm Ormsby (D-3).

Small business advocates testified in favor of SB 5777, saying it would eliminate uncertainty and reduce paperwork related to business operations.

‘Confusing’ Business Licensing Process

Jeff Garfield runs Bedrooms and More, a small family-run furniture business based in Seattle.

At the Wednesday, February 15 Senate Commerce, Labor, and Sports Committee, he told panel members, “Last year we delivered to 92 different taxing districts and I get contacts from several of those municipalities requesting that we get those business licenses annually.”

Krystal Garfield manages the business’ paperwork. She said, “I find it very confusing when we receive these letters saying that we need to fill out paperwork to get a business license. I feel like if there was just one place that we could go to handle all of these things, it would alleviate a lot of stress.”

State Sen. Michael Baumgartner (R-6) agreed. He said that “cities cause lots of issues when they pass different business and labor regulations, that’s for sure.”

Municipal Licensing Overhaul

Under the bills, cities requiring general business licenses must partner with the Department of Revenue (DOR) to provide and renew licensing under the department’s Business Licensing System (BLS). Alternatively, cities may decline to work with DOR if they manage business license and tax filings using the online portal FileLocal, or they decide working with DOR would cause “undue hardship,” or is impractical.

Starting July 1, 2017, any city issuing a new general business license would be required to notify DOR. According to SB 5777’s bill report, approximately 226 Washington cities require a city business license.

Under the bills, general business licenses cannot be renewed more than once a year, and a city can only require a person to obtain a license if he or she does business with that city.

Also, cities requiring those licenses must work through the Association of Washington Cities (AWC) to establish a model ordinance for license requirements, to be adopted by the cities. According to the bills, the ordinance would lay out a “uniform minimum licensing threshold,” detailing when a person would be exempt from licensing.

‘Myriad of Licenses and Regulations’

Mark Johnson, Vice President of the Washington Retail Association said retailers “find it time-consuming, burdensome, and costly” to navigate through multiple business licensing regulations.

He added, “Small retailers do not have extensive staffs to track, comply with, and renew the myriad of licenses and regulations that are required of them from different cities. Cities can have different requirements, fees, structures, and it makes it difficult for compliance. Different renewal dates and multiple locations make it even more challenging.”

‘More Aggressive’ Timeline Added 

Under the bill, DOR would have ten years to partner with onboard the cities.

Peter King, AWC CEO, told panel members, “The timeline that has been set out in the bill we think is reasonable. Right now, there are 66 cities that are using BLS and there are 21 that are basically in the queue waiting to get on board.”

This would not be fast enough, argued Patrick Connor, Washington State Director for the National Federation of Independent Business (NFIB). He told committee members, “The bill envisions at 10-year phase for cities to be able to get into the business licensing system. NFIB insisted and wanted through negotiation…a five year period. We hope the committee will consider a more aggressive approach than waiting a decade for us to see real results.”

Patti Wilson, DOR’s Local Government Liaison, replied that the ten year time frame was needed because “we would have to bring on additional staff into the business licensing service to accelerate bringing on the cities in that shorter timeframe. Currently, we are predicting that we will be able to bring on one city every two months. So, for the five years we are thinking about the 30 cities.”

Connor also said the “hardship” exemption was too expansive, and needs work, although “some cities may lack the technical proficiency…the financial resources” and “may need some staff assistance.”

State Sen. Steve Conway (D-29) told the committee that he was “pleased to see this bill” introduced. In “trying to get movement around these issues of developing what I call a single licensing approach…I see a lot of progress here made between the cities and counties and the business community on this very important issue.”

At a Wednesday, February 15 executive session of the committee, an amendment was added to SB 5777 to shorten the city phase-in period to five years. The amended bill was then voted out of committee to Rules.

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