Monroe's admission tax not child's play for business owners

Monroe's Jump Rattle and Roll has provided kids and adults with a place to let loose and have fun for five years now, but a previously unenforced city tax law has owners Kristina and Paul Barker worried about whether they'll be able to keep their doors open.

Located in the industrial area west of EvergreenHealth Monroe, Jump Rattle and Roll provides families with 8,500 square feet of interactive play space. The indoor fun center features jumbo-sized bouncy houses and other inflatables, slides, dollhouses, play kitchens, air hockey, foosball, a pint-size climbing wall, train set, a private room for birthday parties, a bouncer for toddlers age three and younger and a comfortable lounging area for adults.

"It's a place to go and build family memories with your children,GÇ¥ Paul said. "We're just all about family and fun.GÇ¥

Jump Rattle and Roll offers private jump sessions for kids and adults and hosts birthday parties and corporate team building events. Throughout the week, the Barkers schedule open play times, where parents can bring their kids to jump to their hearts' content. Open play fees are $7 for kids 2-17 and $3.50 for kids between one and two.

Parents and children under one are free.

It is the "open playGÇ¥ designation that came under scrutiny by the city of Monroe finance department, which determined that under Monroe Municipal Code 5.03, Jump Rattle and Roll is required to pay a 5 percent admissions tax on revenue generated during open play sessions. The city penned a letter to Jump Rattle and Roll on May 6, informing them of the tax.

Galaxy Theater is currently the only other business in Monroe subject to the admissions tax. Nonprofits and schools are exempt from the tax.

The Barkers addressed the Monroe City Council during public comment on Tuesday, June 14. Council added the item to the agenda on Tuesday, June 21, agreeing to examine the issue further. The couple returned on June 21, with more information than before.

Jump Rattle and Roll was founded in 2011, after the parents of two young daughters recognized a need in the Sky Valley for affordable, family-friendly activities that could take place rain or shine. The Barkers cashed out their 401K accounts to fund the venture, found a space and went to work. They own and operate Jump Rattle and Roll with the help of four part-time staff.

An additional 5 percent tax on their open play revenue would shut them down, they said.

"We cannot pay this tax,GÇ¥ Paul said. "It will shut our doors.GÇ¥

Kristina said that had they known about the tax, they likely would have sought another location.

"We did open five years ago ' this wasn't in place,GÇ¥ Kristina said. "I don't know that we would have elected to be in the city limits if that was the case.GÇ¥

According to the city, the admissions tax had always been in place; it just wasn't being enforced. City finance director Dianne Nelson said the city previously didn't have personnel available to track businesses eligible for the admissions tax. She recently assigned the project to the city's business licenses customer service assistant, which is how Jump Rattle and Roll was identified.-á -á -á

"She is now doing an internal audit and going through, business by business, to find out who should be paying and who should not,GÇ¥ Nelson said.

The city mailed a notification in December 2015, but the Barkers say they never received it. A second notification was prepared on May 6. City attorney Zach Lell clarified that the tax is not meant to be a fee in the classic sense, but a pass-through tax the patron pays on top of the regular admission charged by the establishment.

The business serves as a conduit, Lell said, charging its customers the extra tax, which gets funneled back to the city.

But the Barkers don't feel their customer base would remain stable with such a significant increase in open play costs. They are already considering raising their prices just to stay afloat, they said, so adding an admissions tax on top wouldn't be feasible. Jump Rattle and Roll generates about $80,000 in annual open play revenues, Paul said, which very roughly pencils out to an average monthly admissions tax of $333.

"That would become one of our biggest expenses monthly,GÇ¥ he said. "It's just a fee that we can't pay.GÇ¥

Paul gave an overview of their operating expenses, which, in addition to staffing, insurance and other miscellaneous costs, includes $67,000 per year in rent.

Councilmembers asked the finance department for information on how neighboring cities deal with admissions tax, and the item was added to the June 28 agenda for further discussion.

Some cities, like Bothell, only charge admissions tax for movie theaters, while all other businesses are exempt. The city of Snohomish only charges admissions tax for adult entertainment, exempting all other businesses. In Marysville, specific types of businesses are exempt, including batting cages, gun clubs and archery facilities.

The council could not come to consensus during ongoing discussion. Councilmember Patsy Cudaback was in favor of only charging admissions tax at movie theaters and for adult entertainment, but not all were in favor of that option. Cudaback was a proponent of establishing a monetary threshold, so only businesses earning over a certain amount per year would be subject to the tax.

Councilmember Kevin Hanford suggested creating a new business classification that would exempt youth-oriented recreational businesses. Councilmember Jeff Rasmussen was opposed to the idea of exemptions, because he said it created "loopholesGÇ¥ that council would later have to plug.

"I guess that's what I don't want to start doing,GÇ¥ Rasmussen said. "Excluding some types of businesses and not others.GÇ¥-á -á

After discussion, council directed Nelson to bring back a draft code amendment that implements a monetary threshold and stipulates an exemption only applicable to youth-oriented recreational businesses.

After the meeting, Nelson said she was considering $100,000 per year as a possible threshold and had plans to discuss it with the city attorney, but the final amount would be up to the city council.

Adding an exemption for small businesses that earn less $100,000 per year won't help the Barkers, because when they add the revenue they receive from private parties to their open play revenue, it exceeds $100,000. This means they would be ineligible for an exemption that applied to businesses earning less than $100,000.

The discussion is expected to continue on Tuesday, July 12.

The Barkers were deeply concerned by the discussion on June 28. Jump Rattle and Roll brings families from all around Snohomish County into Monroe, Paul said, and is well loved by kids and adults alike. The couple boasts a five-star online rating and has collected countless positive reviews. It's been a lot of hard work but also a labor of love, they said, including months of work improving the space prior to their October 2011 grand opening.

"I personally laid every tile,GÇ¥ Kristina said.

After the couple gave testimony on June 14, Sultan Monroe Masonic Lodge member John Mathers was compelled to speak in support of Jump Rattle and Roll. He said he has taken his grandkids to play there numerous times, and they always have fun. -á -á

"It'd be a terrible loss to this community if he had to fold,GÇ¥ Mathers said.