COT Business License Update – Oct 2024
TPCAR continues to meet with the City of Tacoma’s Licensing Department to ensure current information is available for REALTOR® members who sell real estate in the city. Current updates on license requirements and how B&O taxes are apportioned between the brokerage and agent are shared in this update.
We continue to work on the concerns we have regarding non-Tacoma transactions being figured into an agent’s gross earnings and the accompanying license fee charge and will update members on that should things change from the current structure.
Who needs a license?
- Brokerages located within the City of Tacoma
- Both the brokerage and all agents in the brokerage are required to obtain a City of Tacoma business license.
- Brokerages located outside the City of Tacoma
- The Designated Broker (brokerage) pays B&O tax for a listing sold within the City of Tacoma:
- The Designated Broker (brokerage) is required to obtain a business license. The license fee is based on the gross revenue for all transactions under the brokerage (including those outside the City of Tacoma).
- The agent for the transaction does not pay B&O, nor are they required to obtain the business license.
- Individual broker/agents do not need a business license unless:
- Their brokerage/office is located within the City of Tacoma, OR
- The brokerage/office does not remit B&O tax for a property transaction within the City of Tacoma.
How are B&O taxes on real estate transactions calculated and who is responsible for paying them?
B&O taxes due are based upon two-factor apportionment, as not all transactions may be taxed at the full rate depending upon a variety of factors such as where the property seller (the customer) lives B&O may or may not be owed to Tacoma depending upon the location of the seller (out-of-state, for example).
The brokerage may make payment of B&O taxes for the brokerage and agent commission portions which comprise the total commission earned, or the brokerage may pay B&O tax on their portion of the total transaction commission and the agent may pay B&O tax on their portion of the total transaction commission. Payment by the brokerage office on the whole commission removes the responsibility of the agent to pay B&O tax. Brokerages may elect to have a company-wide policy for determining whether the brokerage will pay B&O taxes on transactions for properties within the City of Tacoma, or if they will push that requirement to the individual agent.
Business licensing fees are not expected to increase for the 2025 – 2026 biennial budget and TPCAR expects the City to reconvene a work group to review the business license structure in 2026.
TPCAR members should look out for City of Tacoma business license bills to be sent out the first week of December. Schedule a mid-November class for members to understand this.