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Utility Tax

This page provides a basic overview of the utility tax that can be imposed by cities and towns in Washington State, including examples of local resolutions, ordinances, and documents.

Who Can Impose the Tax?

Any city or town. The authority of cities and towns to impose the tax derives from their general authority to impose excise taxes on businesses doing business within their boundaries. See:

Whom Can the Tax Be Levied Upon?

Utility Tax May be Levied Upon

  • Cable TV
  • Electricity
  • Gas
  • Sewer/Stormwater
  • Solid waste 
  • Steam
  • Telephone (including cell and pager)
  • Water

Utility Tax May Not be Levied Upon

  • Broadcast Satellite TV
  • Internet Services

Imposing Utility Taxes on Other Municipalities

A 2014 court of appeals decision, City of Wenatchee v. Chelan Pub. Util. Dist., holds that code cities may impose the tax on other municipalities providing utility service within their boundaries, on revenues derived from their proprietary activities. The reasoning of that court decision should apply equally to other classes of cities and to towns.

For more information, see our 2014 blog post Important New Court Decision on a City's Utility Tax Authority.

What are the limits on the rate?

Limit of 6.0% (without voter approval)

  • Electricity
  • Gas
  • Steam
  • Telephone

RCW 35.21.870(1). Cities may impose a higher rate with voter approval (majority vote).

No Limit

  • Sewer/Stormwater
  • Solid waste
  • Water
  • Cable TV - may not be "unduly discriminatory"; i.e., must be imposed at the same or a similar rate as is imposed on other utilities. Cable Communications Policy Act of 1984, 47 U.S.C. §542(g)(2)(A). 

Referendum Clause in Rate Changes

A city that imposes a utility tax for the first time or that increases a tax rate may be required to include a referendum clause in the ordinance. From its placement in the text, it is unclear whether RCW 35.21.706, which definitely requires a referendum clause for a gross receipts business and occupation tax, applies to utility taxes.

MRSC recommends a cautious approach of including referendum language in any increase. We note that a number of cities have not included a referendum clause. A court decision or legislative amendment would be needed to clarify this matter.

How Can Revenues Be Used?

There are no limits on how cities use utility tax revenues. Most cities use these revenues for general fund purposes. However, when voter approval is asked for rates higher than 6%, cities often dedicate the additional revenue to specific uses such as roads or public safety.

There have not been many attempts to increase utility tax rates beyond 6% with voter approval. To see recent attempts at voted utility tax increases, see our Local Ballot Measure Database.

Additional Requirements

60-Day Waiting Period for Changes

Any tax changes for electric, telephone, and gas utilities cannot take effect until the end of 60 days after the enactment of the ordinance. RCW 35.21.865. If the utilities are private utiltiies, they need this time to apply to the Washington Utilities and Transportation Commission for a rate adjustment to reflect the tax change.

Examples of Utility Tax Ordinances and Documents

Ordinances and Code Provisions

Tax Rebates/Discounts

Voted Utility Taxes Above 6%

  • Cheney Resolution No. E-040 (2012) – Proposition to renew existing 4% utility tax for 14 years to fund street and sidewalk improvements. Tax applies to electricity and natural gas, maintaining total 14.75% rate. (Voters previously approved an additional 4.75% utility tax for parks and recreation.)
  • Des Moines:
    • Resolution No. 1169 (2011) – Proposition to increase utility tax by 3%, with 1% for historic building capital projects (expiring after 20 years or when bonds are repaid), 0.5% for historic building maintenance and operations (no expiration), and 1.5% for pavement improvements (no expiration). Measure failed.
    • Resolution No. 1215 (2013) – Scaled-back proposition to increase utility tax by 2% for 20 years for pavement improvements. Measure performed significantly better but narrowly failed.
    • Both measures would have applied to electricity, natural gas, solid waste, cable TV, phones, and city utilities
  • Orting Resolution No. 2015-10 (2015) – Proposition to increase utility tax by 3.4% to enhance and maintain police services. Tax applies to electricity, natural gas, phones, and cable TV services; measure narrowly failed.
  • Tacoma Resolution No. 39236 (2015) – Proposition to fund transportation projects with a 10-year, 1.5% utility tax increase and a temporary, 10-year levy lid lift of $0.20. Utility tax applies to natural gas, electricity, and phones; measure barely passed following an earlier failure in 2013.

Last Modified: January 09, 2018