Washington’s Tax Party Starts Oct 1 — You’re Invited (Whether You Like It or Not)

Sales Tax Gets a Service Upgrade

• Starting October 1, services like advertising, IT/tech support, custom software, security/investigation, live presentations, and staffing agencies now fall under the umbrella of retail sales tax. Source: WA Department of Revenue.
• The old “human effort exclusion” in digital automated services is gone. Source: DOR FAQ.
• DOR is scrambling and admits traditional rulemaking is too slow, so they’ll rely on interim guidance, special notices, and advisories. Source: DOR.
• One of the bill’s biggest cash cows: digital advertising. Streaming/cable platforms will pass costs to consumers. Source: Sales Tax Institute.
• Traditional media (newspapers, radio, TV, billboards) are exempt. Source: Avalara.

Chamber note: we will now be collecting sales tax on all event tickets. Because nothing says “business-friendly” like tacking on extra charges for networking and business development.

B&O Tax Gets Pumped 

• For service businesses with gross sales over $5 million, the B&O rate goes from 1.75% to 2.10%. Source: Sales Tax Institute.
• Surcharge on large financial institutions goes up. Source: Sales Tax Institute.
• Future surcharges planned in later years (2026, 2027). Source: BDO.

Credit Unions

• State-chartered credit unions that merge with or acquire a bank after Oct 1 will lose their B&O exemption. Source: WA Legislature.
• Some credit unions are already rethinking their charters. Source: CU Today.

The Outdoors Just Got Pricier 

• The Discover Pass cost is rising 50% — from $30 to $45. Source: EY Tax News.
• Fiscal note predicts about a 15% drop in park attendance. Source: Holland & Knight.

What You Might Have Missed

• One-time sales tax prepayment requirement for businesses with $3M+ taxable sales. Source: Eide Bailly.
• Carve-outs/gray zones around live presentations and seminars. Source: Washington Research Council.
• Sourcing complications when services are consumed partly out of state. Source: Ballard Spahr.
• Legal challenges brewing around digital advertising tax. Source: Inside SALT.
• Exclusion for telehealth/telemedicine preserved. Source: DOR.

Predictions & Advice

• Expect compliance chaos for the next year. Many businesses will overpay or mis-classify just to avoid audit risk.
• Costs will be passed to consumers — whether via higher prices, hidden fees, or creative bundling.
• Watch for lawsuits; Comcast recently filed suit alleging federal preemption of taxes on digital ad sales. Source: Washington State Standard.
• Service businesses: review contracts ASAP and consider tax-shifting clauses.
• Nonprofits: don’t assume you’re exempt — many events will be taxable unless very narrow criteria are met. And it is very likely that you are not exempt.

The Big Picture

This is all coming alongside a backdrop of falling consumer and business confidence in Washington State and record deficits. Federal Funds Information for States recently released their 2025 report. Seven years ago, Washington was first for personal employment growth. Today that number has dropped to 22nd. Seven years ago, Washington ranked third for employment growth, 70% faster than the national average. That number has now cratered to 35th, slightly over half the national average.

These are the first taxes to take effect since the last legislative session, and they won't be the last - with several more effective dates coming at us for new taxes in the months ahead. With a massive budget deficit awaiting legislators in January, and with federal cuts and the shutdown underway - it's likely legislators aren't done proposing new taxes anytime soon.

No voter, business, or policy-maker should be misled into believing there isn’t a relationship between higher taxes and falling competitiveness.