How this tax could affect your business.
Beginning October 1, Washington businesses and consumers will see several new taxes take effect — including expanded sales tax on services and higher Business & Occupation (B&O) tax rates.
These changes are part of a $12 billion tax package passed by the Washington Legislature earlier this year — the largest in state history. The legislation broadens the tax base to include more service sectors and phases in several B&O rate increases over the next few years.
Sales Tax Expands to More Services
For the first time, a wide range of professional, creative, and technology services will now be subject to state and local sales tax.
Starting October 1, sales tax applies to:
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IT support & training: Network setup, help desk services, software/hardware training
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Data processing: Data entry, payroll processing, claims administration, surveys, and similar services
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Website services: Design, development, and ongoing maintenance
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Security services: Security guards, event security, monitoring, and armored car transport
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Temporary staffing: (With some exceptions for hospital staffing)
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Advertising services: Creative development, media placement, digital campaigns, and search engine marketing
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Live events & trainings: Seminars, workshops, and online sessions with real-time interaction
Sales tax does not apply to:
Web hosting, domain registration, newspapers, radio and TV advertising, publishing, or outdoor (billboard) advertising.
The Washington Department of Revenue (DOR) has released interim guidance explaining how these new rules apply to different industries and service types.
B&O Tax Rate Increases
In addition to the new sales tax requirements, B&O tax rates for certain categories of businesses are increasing.
Effective October 1:
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The “services and other activities” category rate increases from 1.75% to 2.1% for businesses with more than $5 million in annual income.
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The financial institutions rate increases from 1.2% to 1.5% for those earning over $1 billion annually.
More B&O rate changes are on the way:
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January 1, 2026: Businesses with more than $250 million in annual taxable income will owe a 0.5% surcharge (expires at the end of 2029).
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January 1, 2027: Rates for manufacturing, wholesaling, and retailing will increase to 0.5%.
What Businesses Should Do Now
Businesses that provide professional, IT, or advertising services should review their pricing, contracts, and billing processes to ensure compliance with the new sales tax requirements.
It’s also a good time to revisit B&O tax projections for the coming years to understand how these increases may affect your operations and margins.
For detailed information, official rate charts, and guidance on how these changes apply to your business, visit the Washington Department of Revenue’s website.
The Burlington Chamber of Commerce will continue to monitor updates and share information to help members navigate these changes. If you have questions or would like assistance understanding how the new laws affect your business, please get in touch with us at steph@burlington-chamber.com or 360-757-0994.