Seattle restaurant taxes come from three levels of government: a 10.25% sales tax collected from customers on prepared food, a state business and occupation tax at 0.471% of gross receipts, and a Seattle B&O tax that, as of January 1, 2026, only applies to restaurants grossing more than $2 million a year. Larger operations may also owe the JumpStart payroll tax, and the city’s sweetened beverage tax usually reaches you as a pass-through on distributor invoices rather than a return you file yourself.
Sales Tax on Prepared Food
Washington charges a 6.5% state sales tax on retail sales, including restaurant meals.1Washington State Legislature. RCW 82.08.020 – Tax Imposed Retail Sales Retail Car Rental King County, city, and regional transit additions bring the combined Seattle rate to 10.25%. You collect it on every check and remit it to the Department of Revenue through the My DOR portal.
Prepared food is defined broadly. It covers anything sold heated, anything made by combining two or more ingredients into a single item, and anything sold with utensils like plates, forks, or cups. That sweeps in nearly every plated dish. Packaged items at a counter or grab-and-go cooler can still qualify for the grocery exemption: sealed beverages that are more than 50% juice, unheated bakery items like muffins or cookies, and raw items that still need cooking, as long as you don’t hand the customer utensils with the purchase.2Washington Department of Revenue. Retail Sales Tax
There is one rule that catches hybrid operations. If more than 75% of your food sales are prepared food, you must charge sales tax on all food items, including the ones that would otherwise be exempt.3Washington Department of Revenue. a href=”https://dor.wa.gov/education/industry-guides/restaurants-and-retailers-prepared-food/retail-sales-tax” target=”_blank” rel=”noopener”>Retail Sales Tax Most full-service and fast-casual restaurants clear that easily, so this only really matters if you run a meaningful retail side.
Use Tax on Equipment and Supplies
Washington treats restaurants as the consumers of the equipment they use to operate. Buy an oven, a POS system, dishes, or tables from a Washington vendor and you pay retail sales tax. Buy the same items from an out-of-state or online seller who doesn’t collect Washington sales tax and you owe use tax at the same 10.25% combined rate.4Washington Department of Revenue. Paying Sales Tax
The list is wider than most operators expect. Computer systems, maintenance contracts, janitorial supplies, signage, repair parts and labor, pest control, and employee uniforms pulled from inventory all trigger the tax. Vending machines do too, whether purchased or rented.4Washington Department of Revenue. Paying Sales Tax You self-report use tax on your state return in My DOR, and auditors look for it specifically because restaurants routinely overlook out-of-state purchases.
Washington State B&O Tax
Every restaurant owes the state B&O tax, and it’s calculated on gross receipts rather than profit. Restaurants file under the retailing classification at 0.471%.5Washington Department of Revenue. Business and Occupation (B&O) Tax On $1 million in gross sales, that’s $4,710. Nothing comes off for cost of goods, rent, or labor.
Smaller restaurants may zero out through the state’s small business B&O credit, which phases out as liability rises. For most restaurants (where less than half of taxable income falls under the service classification), the credit fully eliminates B&O when the annual amount owed is below $1,320.6Washington Department of Revenue. Credits The calculation runs automatically when you file electronically.
Seattle City B&O Tax After the 2026 Changes
The city B&O tax changed substantially at the start of 2026. The retailing rate went from 0.222% to 0.342%, but the threshold jumped from $100,000 to $2 million in annual taxable revenue.7City Finance. Tax Rates and Classifications8City Finance. Seattle Shield Business and Occupation (B&O) Tax Changes Most independent Seattle restaurants now owe nothing to the city on this line.
Restaurants above $2 million in taxable revenue get a $2 million standard deduction and pay 0.342% only on the excess.8City Finance. Seattle Shield Business and Occupation (B&O) Tax Changes A restaurant grossing $3 million pays on $1 million, which comes to $3,420. Unused deduction does not carry forward.
Even if you owe nothing, you still have to file a return reporting your gross revenue to the city.9City of Seattle. Business Taxes Skipping it can trigger penalties. You also still renew your annual Seattle business license; the new threshold doesn’t change the license fee calculation.8City Finance. Seattle Shield Business and Occupation (B&O) Tax Changes
Sweetened Beverage Tax
Seattle charges a $0.0175-per-ounce excise tax on sweetened beverages distributed inside city limits.10City of Seattle. Sweetened Beverage Tax Legally the tax falls on distributors, not restaurants, but distributors pass the cost through on invoices. On a 12-ounce can of soda that’s about $0.21. For fountain syrup concentrate, the math applies to the mixed beverage volume, not the concentrate itself.
Exempt categories include milk-based beverages where natural milk is the primary ingredient, 100% fruit or vegetable juice with no added sweeteners, baby and infant formula, diet or low-calorie drinks under 40 calories per 12-ounce serving, alcoholic beverages, and medical beverages such as meal replacements and sweetened cough syrup. Beverages from small manufacturers with worldwide gross income of $2 million or less per year also qualify for a deduction if the manufacturer is certified by the city.11Seattle Municipal Code. Seattle Code 5.53 – Sweetened Beverage Tax
You don’t file this tax yourself. What you should do is track ounce volumes on incoming invoices and check that the pass-through actually matches what’s owed. Overpayments show up when distributors apply the tax to exempt items like unsweetened iced tea or 100% juice.
JumpStart Payroll Tax
The JumpStart payroll expense tax only reaches larger employers. For 2026, you owe it if your total Seattle payroll was $9,074,409 or more during the prior calendar year and you pay at least one employee $194,452 or more in the current year.12City Finance. Payroll Expense Tax Both figures adjust annually for inflation.
The tax applies only to compensation paid to employees above the $194,452 threshold, and rates scale with both the employee’s pay level and the business’s total Seattle payroll, from 0.746% at the low end to 2.557% for the largest employers paying the highest-compensated staff. Compensation includes bonuses and stock options.12City Finance. Payroll Expense Tax A single-location restaurant is unlikely to hit the payroll floor. Multi-unit groups and hotel restaurant operations can.
The FICA Tip Credit Working in Your Favor
The federal Section 45B credit offsets employer FICA taxes on employee tips. If your employees receive tips for serving food or beverages, you can claim a credit against your federal income tax equal to 7.65% of creditable tips.13Internal Revenue Service. FICA Tip Credit for Employers
The credit doesn’t apply to the portion of tips needed to bring an employee’s total hourly pay up to the $7.25 federal floor used in the calculation. Washington wages already sit well above that, so Seattle restaurant employers can typically claim the credit on nearly all reported tips. File it on IRS Form 8846 as part of the general business credit.14Internal Revenue Service. About Form 8846 Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips Auto-gratuities and mandatory service charges don’t qualify; only voluntary tips count.
Where and When to File
You’ll use two portals. State sales tax, state B&O, and use tax all go through the Department of Revenue’s My DOR portal.15Washington Department of Revenue. My Account The Seattle B&O, sweetened beverage tax, and JumpStart payroll tax go through FileLocal, a shared portal used by several Washington cities.16FileLocal. FileLocal – A Portal to e-File and Pay Business Taxes Licenses and Fees
Seattle B&O is due quarterly for most businesses, on the last day of the month following the quarter: April 30, July 31, October 31, and January 31. Annual filers have until April 30 of the following year.9City of Seattle. Business Taxes The DOR assigns your state filing frequency (monthly, quarterly, or annual) based on your volume.
Late Penalties and Recordkeeping
Missing a Seattle deadline gets expensive quickly. The city adds a 9% penalty on tax due if the return is late, rising to 19% after one month and 29% after two months, with a $5 minimum regardless of amount owed.17City of Seattle. City of Seattle Business License Tax Annual Reporting Form Interest accrues daily from the original due date.
Both the state and city require you to keep records open for inspection for at least five years.18City of Seattle. Directors Rule 5-008 – Recordkeeping Requirements That means sales journals, purchase invoices, payroll records, sweetened beverage volume tracking, and every filed return with its confirmation receipt. Auditors typically pull at least three years and compare reported gross sales between your state and city filings. Keeping those numbers aligned across both portals from the start is far cheaper than reconciling them under audit pressure.