Lacey, WA Local Taxes & Fees: Business Tax Classification (2026)
Key Facts
- Retail sales rate
- One-tenth of one percent of gross proceeds
- Printing, publishing, extracting, processing rate
- One-tenth of one percent of gross income
- Retail services rate
- Two-tenths of one percent of gross proceeds
- All other business activity rate
- Two-tenths of one percent of gross income
- Small business threshold
- $20,000.00 per calendar year or $5,000.00 per quarter
- Penalty
- Gross misdemeanor, up to $5,000 and one year
Summary
In the City of Lacey, Washington, Lacey Municipal Code § 3.02.050 taxes every person doing business in the city under four classifications: retail sales at one-tenth of one percent, printing, publishing, extracting and processing for hire at one-tenth of one percent, retail services at two-tenths of one percent, and all other business activity at two-tenths of one percent. Businesses at or under $20,000.00 a year owe nothing.
1. Upon every person engaging within the city in the business of making sales at retail, as to such persons, the amount of tax with respect to such business shall be equal to the gross proceeds of such sales of the business, without regard to the place of delivery of articles, commodities or merchandise sold, multiplied by the rate of one-tenth of one percent. ... 4. Upon every other person engaging within the city in any business activity other than or in addition to those enumerated in the above subsections; as to such persons, the amount of tax on account of such activities shall be equal to the gross income of the business multiplied by the rate of two-tenths of one percent. ... B. The gross receipts tax imposed in this section shall not apply to any person whose gross proceeds of sales, gross income of the business, and value of products, including byproducts, as the case may be, from all activities conducted within the city during any calendar year are equal to or less than $20,000.00, or are equal to or less than $5,000.00 during any quarter if on a quarterly reporting basis.
Full Breakdown
The Lacey City Council levies this tax in LMC § 3.02.050 on the act or privilege of engaging in business activities within the city, whether the person's office or place of business is within or without the city. A contractor or seller based outside Lacey is therefore inside the tax if the activity happens in the City of Lacey. The tax is calculated by applying a rate to gross proceeds of sale, gross income of the business, or value of products, including byproducts, depending on the classification.
There are four classifications. Retail sales are taxed on gross proceeds, without regard to the place of delivery, at one-tenth of one percent. Printing, printing and publishing, publishing newspapers, magazines and periodicals, extracting for hire, and processing for hire are taxed on gross income at one-tenth of one percent. Retail services are taxed on gross proceeds at two-tenths of one percent. The catch-all fourth classification covers every other person engaging in any business activity not listed, taxed on gross income at two-tenths of one percent. The code says this group includes persons developing or producing custom software or customizing canned software, persons producing royalties or commissions, and persons rendering any type of service that is not a sale at retail, a sale at wholesale, or a retail service.
Section 3.02.050(B) sets the small business threshold: the tax does not apply to a person whose gross proceeds, gross income and value of products from all activities in the city are $20,000.00 or less in a calendar year, or $5,000.00 or less in a quarter for a business on quarterly reporting. The section was last amended by Ord. 1701 in 2026.
A business with more than one kind of activity is taxed under each applicable subsection (LMC § 3.02.070(A)). A taxpayer who can document that tax was paid on the same gross receipts elsewhere can claim a credit where the city's tax would burden interstate commerce (§ 3.02.070(B) and (C)). LMC § 3.02.100 lists exemptions, including public utilities taxed under Chapter 3.01, employees as distinguished from independent contractors, gross proceeds from the sale of real estate (but not real estate commissions), and rental income from a contract to rent for a continuous period of thirty days or longer. A booth renter is an independent contractor and is not exempt as an employee.
Violations & Fines
Under LMC § 3.02A.230, violating Chapter 3.02A, making a false statement on a license application or tax return, or aiding another person to evade a license fee or tax is a gross misdemeanor, punishable by a fine of up to $5,000 (five thousand dollars), up to one year in jail, or both. Under § 3.02A.240 the director can suspend or revoke a Title 5 business license for default on a Chapter 3.02 tax, with a written appeal to the city clerk within thirty days.
Frequently Asked Questions
Do I owe the City of Lacey business tax if my income is small?
What rate does a consultant or other service business pay in Lacey?
Does a business located outside Lacey owe the tax?
Are employees taxed under Chapter 3.02?
What happens if a Lacey business stops paying this tax?
Sources & Official References
Other rules in Lacey
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