The most recent Washington State legislation included a few updates to how the Department of Revenue handles sales tax. Whether you run a business or are looking to start one, read on and stay up to date with upcoming changes.

Senate Bill 5814 Effective October 1, 2025

Under Senate Bill 5814 signed into law on May 20, 2025, Washington State will tax a broader range of services previously exempt from sales tax. Notable additions include:

• IT services including consulting and data processing;
  
• Custom website services and software development;
  
• Security, investigation, and armored-car services;
  
• Temporary staffing services, except for hospital workers;
  
• Advertising services;
  
• Live presentations (in-person or online seminars/workshops); and
  
• **Any service that primarily involves the application of human effort by the seller

These services will now be subject to both retail sales tax and the Retailing B&O tax and no longer the Services B&O tax after September 30, 2025.

**This was previously an exception that has been removed and could have a major impact on many industries depending on how it’s interpreted. For example, an attorney consulting via email, a bookkeeper adding a transaction online, or a consultant sharing a google doc may now be subject to sales tax because digital tools were used as part of the service. The Department of Revenue has not released guidance and is currently taking feedback with the goal of issuing additional guidance by the October deadline.

Start planning

• Review your service and business offerings and identity if some or all revenue has been reclassified from “service” to “retail” as of October 1, 2025.
  
• Update invoice forms, contracts and agreements with customers to indicate that you will be charging sales tax.
  
• Establish a reliable system and document the process to ensure you and your staff are charging the correct rates, reporting the correct revenues and remitting the right taxes on time.
  
• Talk with your accounting team to make a plan and understand the rules.

This could get complicated! Do you have customers in more than one location?  

Remember, retail sales tax rates are based on the customer location. Rates change as often as quarterly, so you’ll need to update your invoice system regularly. You are responsible for reporting the proper amounts to WA State’s Dept of Revenue regardless of what system you use to track sales and sales tax. The state publishes new rates each quarter online.

Oh No, There’s More!

The B&O tax rates are also expanding on October 1, 2025. The new “Service and Other Activities” rate increases from 1.7% to 2.1% if your previous calendar year sales exceed $5m. 

On the Horizon in 2027

• Higher .5 % B&O tax rate for retail, wholesale, manufacturing, and extracting sales
  
• Games of chance B&O tax rate moves up to 1.8%
  
• If your business generates $3 million or more in taxable retail sales during calendar year 2026, there will be new prepayment rules beginning June 2027.

We’re Here for You

Many businesses find that this is the time to outsource their bookkeeping to help them navigate the myriad reporting that sales tax compliance requires, particularly if you have customers in more than one location.

Let us know if we can help you understand how these changes impact your business. Whether you need an expert to manage your payroll and pay your bills or just help with your monthly revenue filings, we specialize in customizing our service to your unique accounting needs.