Federal Way, WA Local Taxes & Fees: Business Tax Classification (2026)
Key Facts
- General rate
- 7.75 percent of gross income
- Solid waste rate
- 17.75 percent of gross income
- License required
- business license under FWRC Title 12
- Late penalty
- 10 percent after 15 days
- Rate-change notice
- 60 days before taking effect
Summary
Federal Way has no general business and occupation tax; instead FWRC 3.10.040 classifies specific utility-type businesses (telecom, cellular, gas, electric, cable, water, sewer, solid waste, storm drainage) and taxes each class at its own gross-income rate.
There are levied upon and shall be collected from everyone, including the city, on account of certain business activities engaged in or carried on in the city, occupation taxes in the amounts to be determined by the application of rates given against gross income as follows: (1) Upon everyone engaged in and carrying on a telegraph business, a tax equal to 7.75 percent of the total gross income from such business in the city during the period for which the tax is due... (7) Upon everyone engaged in the business of collecting solid waste, a tax equal to 17.75 percent of the total gross income from the city during the period for which the tax is due, less income derived from collection and sales of materials not defined herein as solid waste.
Official source re-checked September 8, 2026: no newer edition of the code had been published (publisher’s edition: current through Ordinance 26-1049, passed August 11, 2026).
Full Breakdown
040 levies a separate occupation tax, keyed to gross income, on ten distinct classes of business activity conducted in the city. 75 percent of gross income from business done in the city, with cellular and telecom operators required to count 100 percent of gross income received from business in the city when calculating intrastate toll revenue. 75 percent rate. 75 percent on itself. 75 percent of gross subscriber revenues, a narrower base that excludes leased-channel and advertising revenue. 75 percent earmarked for street maintenance: a minimum of 70 percent of that excess must fund residential street repair, with the remaining 30 percent going to other city streets.
070 bars any rate change from applying retroactively and requires 60 days' notice before a new rate takes effect, with the designated official required to mail affected businesses a copy of any rate-change ordinance.
Violations & Fines
FWRC 3.05.020 makes it unlawful to violate or fail to comply with any provision of Title 3 or the director's implementing rules, which covers a utility business that fails to hold the required license under FWRC 3.10.030 or misreports gross income under 3.10.040. Late payment draws a 10 percent penalty on the unpaid tax under FWRC 3.05.040 if not paid within 15 days of the due date, plus 12 percent annual interest on the unpaid balance under FWRC 3.05.030, and any unpaid tax and penalties become a collectible debt to the city. A taxpayer disputing the director's assessment may appeal to the city hearing examiner under FWRC 3.05.070 while withholding the disputed amount, subject to interest if the appeal fails.
Frequently Asked Questions
What businesses does Federal Way's utility tax classify separately?
What is the tax rate for most utility classes in Federal Way?
Why is solid waste taxed higher than other classes?
Do businesses need a license to operate under this tax?
Sources & Official References
Other rules in Federal Way
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How other cities in King County handle business tax classification.