The bill creates a new state excise called the "payroll expense tax," to be codified as a new Title 50C RCW. It imposes a 5% tax on an employer’s wages for each employee that exceed the Social Security maximum wage, with the commissioner of the employment security department annually setting the excluded wage amount equal to the Social Security Administration’s maximum. The tax takes effect July 1, 2026, must be remitted to the employment security department in the manner it specifies, may not be deducted from employee wages by employers, and exempts employers whose total employee wages in the prior calendar year were $7,000,000 or less. A credit is allowed against the state tax for eligible city payroll expense taxes imposed as of January 1, 2024, subject to limits tied to amounts remitted in the immediately prior state tax reporting period and a cap based on the city tax in effect on that date. Employer reporting, six-year recordkeeping, confidentiality, and rounding rules are specified, and revenues including penalties and interest are deposited into the state general fund. The bill establishes enforcement, collection, and appeal rules: immediate payment and reporting obligations on sale or transfer of a business and successor liability with required withholding from the purchase price; commissioner authority to issue assessments, jeopardy assessments, and notices; distraint, seizure, public sale procedures, and the ability to file warrants and liens that can be docketed as civil judgments; a notice-and-withhold procedure directed to third parties; interest on unpaid taxes at 1% per month; escalating penalties for willful failures to report or remit; authority to compromise or charge off claims; and injunctive remedies requiring bonds. Administrative appeal procedures allow appeals to the commissioner and assignment to an administrative law judge under chapter 34.12 RCW with 30-day filing deadlines, stays of collection on appeal for disputed amounts, commissioner review of ALJ decisions, and judicial review under RCW 34.05.452. The employment security department may adopt rules and is exempt from chapter 39.26 RCW procurement rules until October 1, 2026. Some portions of the extracted text are incomplete or missing in the provided material (for example, portions of section 8 and later sections, and formal definitions and certain cross-referenced sections), so specific language for a few referenced provisions and complete codification details are not available here.

If enacted, large Washington employers will pay a new cost: a 5% payroll expense tax on each employee’s wages above whatever the Social Security maximum is for the year, starting July 1, 2026, with smaller employers (those whose total employee wages were $7 million or less the prior year) exempt. Employers cannot pass the tax to employees, must file and remit to the Employment Security Department, keep records for six years, and face interest (about 1% per month), escalating penalties, liens, seizure of property, and possible injunctions or bond requirements if they don’t pay; buyers of businesses may have to withhold purchase funds to cover outstanding tax until the seller proves payment, creating transactional risk for purchasers. The Employment Security Department will take on new administration, enforcement, rulemaking, and contracting duties (including coordinating a limited credit for certain city payroll taxes and an exemption from some procurement rules until October 1, 2026), and all revenues and penalties flow to the state general fund with legislative intent toward schools, health care, and social services. Important details needed to predict some outcomes precisely are missing from these excerpts—definitions and several cross-referenced sections (including full credit mechanics, certain officer liability rules, and appeal procedures) are incomplete—so exact application in particular cases could be unclear.