Measure Streamlining Municipal Business Licensing Clears House

Measure Streamlining Municipal Business Licensing Clears House
As two pieces of legislation related to simplifying municipal business licenses gain traction in Washington's legislature, HB 2005 clears the House floor in a landslide majority. The measure would require cities to transition to online licensing websites to ease confusion related to businesses operating within multiple jurisdictions. Photo: Thomas Hawk.

Washington small business owners may soon get a large licensing and reporting break. On Thursday, March 2, HB 2005 was voted out off the House floor with a 96-2 majority. To add more uniformity, the bill would require cities to transition to online portals for distributing municipal general business licenses, effective within a ten year period.  Several lawmakers argued the measure would reduce time spent by business owners determining how to comply with licensing requirements for operating within multiple cities. However, one opponent worries that the effort might harm businesses if the phase-in made too short or if employers weren’t properly educated on the new licensing system.

Prime sponsor is State Rep. Kristine Lytton (D-40). Cosponsors include State Reps. Terry Nealey (R-16), Ruth Kagi (D-32), and Timm Ormsby (D-3).

Ending Business License Redundancy

During executive session on the House floor, Lytton told colleagues that the bill would help businesses “thrive in our community.”

“Those businesses that are, in many cases, owned by our next door neighbors and our friends that…make deliveries to other cities and then spend the midnight oil doing the reporting on that,” she said.

In “the system that we have now, (employers) actually have to file business licensing for every city that they make a delivery to,” Lytton added. “We believe that it’s important and we have the resources available (so) they can access those through the Department of Revenue to streamline the reporting.”

Under HB 2005, cities must eventually adopt Revenue’s Business Licensing Service (BLS) for issuing and renewing general business licenses. Beginning in 2018 through the end of 2021, Revenue must bring on six cities per year. By December 31, 2027, the department will have added the remaining cities.

Cities would be exempt from participating if they already use the online local business license and tax filing portal known as FileLocal, or have a population less than 500 and determine the partnership would “cause an undue hardship.”

Streamlining Local Business Regulations

According to the bill, cities would be required to partner with the Association of Washington Cities (AWC) to devise a general business licensing model ordinance, which would include a “uniform minimum licensing threshold” for when a person would be exempt from obtaining a license. Cities would then adopt the ordinance on January 1, 2019.

On Wednesday, February 15, a nearly identical bill, SB 5777, was voted out of the Senate Commerce, Labor, and Sports Committee. Last month, supporters of the bill testified that it would eliminate uncertainty for business owners operating out of multiple jurisdictions. The bill was amended to quicken the process of Revenue bringing on cities to the online system to five years, at half the rate of the House bill as written. Revenue staff, however, said the ten year timeline was agreed upon as reasonable to bring on additional staff and achieve the goal.

Lawmakers voting in favor of HB 2005 included Lytton, Kagi, House Assistant Minority Floor Leader Matt Manweller (R-13), and State Reps. Cary Condotta (R-12) and Noel Frame (D-36). The two opposing votes came from State Reps. Judy Clibborn (D-41) and Tana Senn (D-41).

Lytton sponsored an amendment later adopted into the measure which extended the last time cities could begin participating with FileLocal and still be exempted from using BLS, from 2017 to 2018.

Senn: Bill Is A Work In Progress

Although the vast majority of lawmakers voted to pass the measure, Senn explained her “no” vote was to send a message to the Senate that the bill should be viewed as a work in progress.

She added it would make sure that “we are giving the cities enough time and capacity” and “understanding of the new system, so they can be sure that they get into the system in the right way and the right fashion.” Also, “so it’s not a burden on them in such a way that they lose revenue or (we) hurt small businesses in their effort to try to comply but not have enough time.”

Lawmakers supporting the measure argued HB 2005 would be a large break for small business owners, who often get bogged down by paperwork requirements.

Manweller told colleagues, “We support any bill that makes it easier to do business in the state of Washington. This portal idea is a great one.”

Frame: Small Biz Is The Heart Of A Community

“Small businesses are the beating heart of every community,” Frame argued. “It is a simple fact that asking (them) to spend their time doing work on paper, jurisdiction by jurisdiction; it’s a waste of their time. It’s 2017; we have the technology. It is not a good use of their time to be driving around the region, municipality by municipality, paying fees, filing for licenses. This is not what we want to do for our small businesses.”

Kagi said she heard similar struggles from one of her friends who owns a mattress store. “About three years ago, when there was reporting to the cities of deliveries in their areas, all of the sudden he was having to get a business license from Lake Forest Park…the city of Edmonds, from the city of Lynnwood, from every individual city where he delivered a mattress. It clearly was a real barrier for businesses and an unneeded complexity.”

Condotta said, “I am excited about this…in the body of bills that came through the appropriations committee there are so many that would be devastating to small business literally putting small businesses out of business, and this is the one bill that I’ve seen that actually does something for small business. It doesn’t go far enough, but at least it’s moving in the right direction because there are so many that are not.”

The measure is not currently scheduled for a hearing in the Senate.

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