Renton City Council voted Monday to switch to a business license and tax portal system sponsored by the cities of Bellevue, Everett, Lake Forest Park, Seattle and Tacoma.

The council voted 6-0 (Councilmember Don Persson was absent) to enter into the interlocal agreement with the other cities and become a principal city for the FileLocal system.

Following the passage of HB 2005 in the 2017 legislative session, city officials have been looking into how the bill will affect the way businesses pay Business and Occupation (B&O) taxes and per employee business taxes (head tax).

The bill sought to improve “the business climate in this state by simplifying the administration of municipal general business licenses,” according to the bill summary.

There are nearly 6,000 businesses registered within the city of Renton. About 7.5 percent pay B&O tax, 30 percent pay head tax and the remaining pay for licensing, according to stats presented by city officials at earlier Committee of the Whole meetings.

The bill required the city to consider two options — use an online system administered by the Washington Department of Revenue that will help with licensing but does not allow businesses to pay city-administered taxes or a switch to multi-city portal called FileLocal, which would allow businesses to pay licensing fees and city-administered taxes in the same system.

In November 2017, officials recommended council members vote on utilizing FileLocal. Nate Malone, the city’s tax auditor, told the Committee of the Whole last year that FileLocal was preferable “due to their tax integration and providing a one-stop shop for our business community and providing excellent customer service.”

FileLocal also allows cities to customize the system to meet individual city needs.

Renton will enter in the interlocal agreement as a principal city, which means the city will have voting rights and will help with the management of FileLocal. Subscriber cities will not have voting rights.

Renton approved by the FileLocal executive board to join in as a principal city, according to Malone. The city will switch over to the new system starting the third financial quarter.

The city will also have to pay a fee of about $17,000 to join the agency, Malone said.

Upon recommendation from city officials, last year council also approved eliminating head tax, reducing B&O tax threshold to $500,000, and maintaining the current tax cap and rates. The reduction of the B&O threshold was recommended in order to keep net revenue neutral and impact to small businesses as low as possible during the transition.

With the new changes, officials estimated that 1,033 businesses would have to pay B&O taxes and 4,967 businesses would have to pay license fees. Around 541 businesses will see an increase in taxes by an average of $570, while around 42 businesses will see a decrease in taxes by an average of $515.