Thursday, October 1, 2026
Proposed subsection language for Lacey’s business and occupation tax code sparked questions over whether it addresses a gap or restates already established provisions.
The three proposed municipal code amendments were laid out by City Attorney Dave Schneider for the Lacey City Council at a work session on Tuesday, June 9.
He framed all three as routine housekeeping items, with separate ordinance votes expected later this summer. No action was taken during the work session.
The first proposed change targets Lacey Municipal Code (LMC) 3.02.050 or the B&O tax.
Staff proposed adding a fourth subsection drawn verbatim from the state's B&O Tax Model Ordinance. It's an optional provision Lacey didn't include when it enacted the tax.
The addition would apply to businesses that do not fall under retail sales, printing, publishing or retail services, taxing those activities at two-tenths of one percent of gross business income.
Custom software development, software customization, royalties, commissions and general service businesses are among the activities named in the subsection.
Schneider noted the language was drawn from a model ordinance provision cities may adopt if applicable, and staff determined it applied to Lacey's B&O activity.
"We are not attempting to expand the number of businesses that are going to be subject to business and occupation tax," Schneider said. "We're clarifying the businesses that might wonder whether they are a retail service or a sale at retail."
Mayor Andy Ryder pressed on whether landlords collecting rent could fall into the new subsection's scope. Schneider said he would verify the answer, but noted a separate exemption listing exists elsewhere in the code.
Schneider also noted mandatory amendments to the B&O tax definition of retail sales are due by Jan. 1, 2027, meaning the council will revisit that section of the code again before year's end.
The second item addresses latecomer agreements in LMC 13.52.
A latecomer agreement allows a developer, who installs water or sewer infrastructure, to recover a portion of those costs from future property owners, who later connect to or benefit from the same improvements.
Revised Code of Washington Chapter 35.91 authorizes recovery periods of up to 20 years for those arrangements. Lacey Public Works Standards also allow 20 years.
The municipal code, however, still reads 15 years, a number never updated after state law changed, and staff recommended amending LMC 13.52 to match the 20 year recovery periods.
Schneider said the city isn't in violation of state law because no active agreement has yet reached the 15-year mark. He noted, however, that some deals with 15-year terms are approaching expiration.
Council member Lenny Greenstein asked whether existing agreements would be affected. Schneider confirmed agreements already signed at 15 years would remain unchanged. The updated term applies only to new agreements going forward.
The third item involves LMC 5.38, the massage and reflexology business ordinance the council adopted on Nov. 19, 2024, under Ordinance 1666.
The Lacey Finance Department receives license applications, and then routes the applications to the Community and Economic Development Department (CED) and law enforcement for review.
If a denial follows, applicants have a right to appeal. Appeals have historically been administered by CED, but the ordinance language does not make that clear.
The proposed amendment would clarify CED facilitates the process to the hearing examiner. It would also cross-reference the city's updated Title 11 hearing examiner rules from last year.
Schneider added the amendment also codifies CED's hearing role. The department is responsible for getting matters before the examiner, not for presenting them at the proceeding.
Staff said the massage ordinance amendments are still being finalized, with a target timeline of this summer.
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