Professional employer organization wages

From the 2024 DOR Tax Exemption Study

82.04.540(2) - Professional employer organization wages Description A professional employer organization (PEO) may deduct the actual cost of wages and salaries, benefits, workers’ compensation, payroll taxes, withholding, and similar items paid to or on behalf of certain employees who are co-employed by the PEO and a client of the PEO. Purpose To exclude pass-through payroll expenses from B&O tax. Taxpayer ($ in millions): savings FY 2024 FY 2025 FY 2026 FY 2027 State Taxes $0.570 $0.590 $0.610 $0.630 Local Taxes $0.000 $0.000 $0.000 $0.000 Repeal of Repealing this deduction would increase revenues. However, a PEO may qualify to exemption deduct wages, salaries, etc. as advances or reimbursements (WAC 458-20-111). Potential ($ in millions): revenue gains FY 2024 FY 2025 FY 2026 FY 2027 from full repeal State Taxes $0.000 $0.530 $0.610 $0.630 Local Taxes $0.000 $0.000 $0.000 $0.000 Assumptions - This repeal takes effect July 1, 2024, and impacts 11 months of collections in fiscal year 2025. - Growth rate mirrors the real income growth rate reflected in the Economic and Revenue Forecast Council's March 2023 forecast. - Certain PEOs would restructure and use the paymaster services for