WASHINGTON STATE – One month from Labor Day, a slew of Washington businesses will be subject to new retail sales taxes, which will be passed onto consumers.
The 2025 Washington State Legislature passed Engrossed Substitute Senate Bill (ESSB) 5814, which added new business activities to the definition of retail sales.
Those new taxes will be collected starting Oct. 1.
According to the Washington Department of Revenue, new business activities impacted by the tax include advertising services, live presentations, information technology services, custom website development services and more.
“Not only is it going to be a significant new tax on a whole host of things, but it’s so poorly defined….you know, food, gas, housing, childcare, healthcare, it’s all getting taxed,” Sen. John Braun, R-Centralia, told The Center Square. “It’s all going to accrue to a higher cost of living for Washingtonians across the state. And that’s bad, that’s really bad.”
In an Aug 22 commentary, Braun wrote, “The sales-tax hike isn’t the largest of the tax increases that will hit when October arrives. That title belongs to the jump in the business-and-occupation tax rate, which is expected to take another $5.6 billion from Washington employers over four years.”
Braun noted the Washington DOR typically has months or longer to spell out exactly how new taxes will impact businesses. This year, majority Democrats rushed through major tax hikes in the final days of the 2025 legislative session, giving the department little time to provide details.
“Normally what you’d see is the Department of Revenue going through a formal rulemaking process with input from tax professionals saying, ‘OK, what about this, and what about this? How do I give advice to my clients on this to make sure that they collect it?’” said Braun.
Braun said the tax on “presentations” leaves a lot of room for interpretation.
“That could be entertainment. It could be education. It could be a safety brief or driver training. All that stuff under this broad law that could be taxed,” said Braun.
On it’s website, DOR noted it is devoting significant resources to developing and publishing guidance prior to the effective date of Oct.1, 2025 including Interim Guidance Statements (IGSs) to be published in September for advertising services, custom software, temporary staffing businesses and more.
“If they don’t collect it, it can put a whole bunch of businesses in a real tough position. They don’t know whether to collect the tax or not collect the tax,” said Braun. “And if they don’t collect the tax and revenue comes back and months or years later, they say they owe it, then you know, there’s no way to collect it and they must pay it. It is chaos is what it is.”
As reported by The Center Square, majority Democrats contend the tax and fee increases are necessary to keep up with increased costs due to inflation and to ensure Washingtonians have access to government services.
Rep. Joe Fitzgibbon, D-West Seattle, told The Center Square the budget that passed was filled with “difficult decisions.”
“Whether it’s difficult reductions or difficult revenue, not a single cut or a single tax increase is something that is easy or that doesn’t impact somebody or that we take lightly,” he said. “I really think we did the best we could, given the hand that we were dealt.”
DOR indicated it anticipates publishing interim guidance statements on the new sales tax imposition during the first two weeks of September.
For more information and updates, click here.
