Licensing, permitting top regulatory burdens for Washington businesses

Seattle clothing shop
Extensive licensing requirements and unclear permitting processes are two of the main challenges for Washington businesses, according to industry leaders. Photo: Magrealthkoo

Washington businesses often struggle to navigate numerous licensing and regulatory requirements while operating in the state, and industry and business leaders are saying these challenges are major deterrents for employers to move into the state and make a living.

Among their concerns, stakeholders also cite the lack of predictable timelines for economic development projects and a non-centralized agency for business licensing. 

Lee Newgent, Executive Secretary of the Washington State Building and Construction Trades Council, told Lens that the main issue with Washington’s regulatory system is that there isn’t a set time limit for a decision regarding project applications.

“We support Canada’s system where there should be a decision from the application date within an 18-month window,” he added. “It should be something definite, instead of open-ended like the way it is.”

The Millennium Bulk Terminals project in Longview began its permitting process five years and nine months ago and is still trying to acquire necessary permits. The Vancouver Energy terminal has also endured delay. That project has spent more than four years under review, and the Washington State Energy Facility Site Evaluation Council (EFSEC) is recommending the governor deny the project.

The problem is that private investors may not want to wait four or five years in an application process with no set deadline, added Newgent.

“We are going to start losing out in that investment, which is not something the state of Washington or federal agencies have the money to do. It will have to come from private investment companies, but only if they are going to have a return on investment or a defined window so they know if their application is moving forward or not.”

Another problem is the perceived bias when considering projects and their permits.

“If water impact is being looked at, it should just consider water and not other issues,” he added. “We are strongly confident that the people that are applying for export projects can remedy any issues brought up in Environment Impact Statements (EIS).”

Newgent said the problem is political pressure placed on state departments – entities that should remain neutral.

“Whether you are Democratic or Republican, these communities need new investment,” he added. “We support the idea of (companies) creating long-term building trades and family-wage jobs…an actual tax base, tax return and infrastructure investment.”

For the retail sector, businesses have two main regulatory challenges, according to Renée Sunde, President and CEO of the Washington Retail Association (WRA).

The first is the Business and Occupation (B&O) tax, which is a gross receipts tax levied on all businesses. In Washington, the state lacks a centralized jurisdiction run by the state or another institution because taxing jurisdictions prefer to operate separately, Sunde said.

“A 10-employee business has to fill out all paperwork for all the different jurisdictions and it is a pain,” she said. “Take a small furniture business in Olympia that delivers couches and desks to Yelm, Tumwater and Lacey. For every city they do work in, they have B&O taxes and have to manage them individually because it’s not centralized in one location.”

She added that the state of Washington should centralize its efforts so the Department of Revenue collects the B&O tax, but she believes that cities don’t want to lose local control to the state because they might be charged for services.

Along with that tax burden is the countless number of business licenses – and the fact that each city requires a separate license, added Sunde.

Jeff Garfield, President of Seattle-based Bedrooms & More, told Lens he experienced this problem firsthand in dealing with the state destination-based sales tax. The tax is collected on retailers delivering products outside of their taxing district in the place where the product is transported.

“Because we are a business where we deliver all over the state, it is a fairly onerous job to get that reporting done correctly,” Garfield told Lens.

The real problem, he added, is the unintended consequence of the tax’s implementation.

“These smaller cities decided that when they are receiving this revenue from a Seattle store, they said the (company) must be doing business in my city or town, therefore I will require business license or B&O tax from that company.”

Garfield said the business started receiving letters from smaller communities and taxing districts demanding they get annual business licenses at around $100 each.

“Just our little store in the Wallingford district in Seattle delivers to over 100 different taxing districts. If we have to pay a business license tax to every single district for driving something in and dropping it off at someone’s home, it would be kind of ridiculous.”

Garfield added there should be a threshold to define the “work” a business is doing in a particular taxing district before needing a business license. This would help differentiate a business making a delivery for two minutes, versus a company that comes in and remodels a kitchen or requires more labor.

Last session, State Rep. Kristine Lytton (D-40) sponsored HB 2959, which would simplify business licenses and encourage cities to centralize them. The bill was signed into law last June.

“It’s a step in the right direction and sets up the process for cities to join and have the state organize it, but doesn’t force anyone to do it, which is what really needs to happen,” said Sunde.

A centralized system for both the B&O tax and business licenses would be beneficial for both small and large businesses, she added.

“Even moreso, the burden is on the little business where the owner and his wife may sit at the kitchen table at night…it’s time they could be doing normal family things or making their business better.”

 

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