TPCAR is sharing a quarterly update on the City of Tacoma's Business License program which requires all real estate agents to get a license and pay a license fee to the City of Tacoma if they complete one or more transactions in the City. TPCAR will provide additional details and answers to questions as we learn of any changes to the business license ordinance and its enforcement.

Additional, city-provided resources are available here:

• Information for Real Estate Brokers

Background

In November 2022, Tacoma City Council passed an ordinance which increases business license fees by as much as 700% over the next two years. While Council claims that only 10% of businesses will incur significant fee increases, real estate is one industry which will experience significant changes. The City of Tacoma also requires Brokers with a gross income over $250,000 to pay B&O tax on gross income from commissions and services, unless the brokerage office remits tax on the full gross commission earned by the brokerage office.

Specifically, the ordinance (28838, amending Section 6B.20 of the Tacoma Municipal Code) does the following (refer to the Annual Business License Fees chart linked below for the fee increase schedule):

1. Requires that all real estate offices pay a license fee based upon the total gross income of its agents.
2. Requires that all real estate agents, who conduct at least one transaction in the City of Tacoma, pay a license fee based upon their total gross income of all transactions (this includes transactions outside the City).
3. Increases fees on a tiered basis as-determined by annual gross income.

Per comments made by City Council, these fees are expected to generate an additional $10 million per year for the City's General Fund and are likely to be used to cover gaps in funding for public safety.

Annual Business License Fees

https://www.cityoftacoma.org/government/city_departments/finance/tax_and_license/business_license/other_license_information/business_license_fees

Regarding billing, the license invoices - or tax returns - are sent to the mailing address that the agent set up on their account with the City (email in lieu of snail mail is optional). If a real estate office manages the license renewals for their agent/brokers they will get those bills sent to them.  If an office no longer wants to manage the renewals for their agents, the agents would just need to update their mailing or email address on their account so it is sent directly to the agent.

Here are a few practical examples of what this could look like for a broker who completes a transaction in the City of Tacoma.

• Broker with Gross Commission Income of $150,000 who does 1+ transaction(s) in Tacoma would have a license fee of $130.00 in 2023.
• 20 brokers with Gross Commission Income of $150,000 each with 1+ transaction(s) in Tacoma.  Each broker would owe $130.00 . Total license fees charges between all 20 would be $2,600 in 2023.
• Brokerage with 1+ transaction(s) in Tacoma and with Commission revenue of $5,000,000+ would have a single license fee of $1,500.00 in 2023

TPCAR is continuing to pursue options to push back on this ordinance and get relief in the future. Unfortunately, for the time being, the ordinance remains in place and agents/brokerages are advised to comply with its provisions.