New sales tax and B&O rate changes take effect Oct. 1
Washington employers and consumers face new taxes starting Oct. 1. Companies will need to start collecting sales tax on a broad range of services, including IT support, digital advertising, live events and more. At the same time, several B&O tax rates will increase, with additional rate hikes scheduled over the next two years.
The Washington Legislature approved the changes this spring as part of a $12 billion tax package, the largest tax increase in state history.
Sales tax on services
Starting Oct. 1, the following services will now be subject to the sales tax:
- IT support & training: Network support, help desk services, software/hardware training
- Data processing: Data entry, payroll processing, claims, surveys, etc.
- Website services: Design, development, ongoing support
- Security services: Security guards, event security, monitoring, armored cars
- Temporary staffing: Exceptions exist for hospitals
- Advertising services: Creative development, media placement, online ad campaigns, search engine marketing
- Live events & trainings: Seminars, workshops, and online presentations that involve real-time interaction
Does NOT apply to: web hosting, domain registration, newspapers, radio/TV, publishing, and out-of-home advertising.
The Washington Department of Revenue has issued interim guidance on each section of the new law.
B&O tax changes
Starting Oct. 1, the rate for businesses in the services and other activities category with over $5 million in income increases from 1.75% to 2.1%. In addition, the B&O rate for financial institutions earning $1 billion+ in annual net income will permanently increase from 1.2% to 1.5% on Oct. 1.
Additional B&O tax rate changes are coming in 2026 and 2027.
Starting Jan. 1, 2026, businesses with more than $250 million a year in taxable income will need to pay a 0.5% surcharge, on top of regular B&O tax. The surcharge expires at the end of 2029. Learn more.
And starting Jan. 1, 2027, B&O rates for many categories of businesses (manufacturing, wholesaling, retailing) will be bumped to 0.5%.
What You Can Do Now
Review Contracts
Look at agreements that extend past October 1, 2025, and identify whether they involve newly taxable services. Talk with clients, vendors, or contractors now about how invoices may change.
Talk with Your Accountant
Ask how this law impacts your business or nonprofit and what you need to do to prepare.
Register for My DOR
If you don’t already have one, create an account at dor.wa.gov. This is where you will report and remit sales tax.
Attend a Free Webinar
The Department of Revenue is offering ten free webinars between September 16 and December 9, 2025 called Introduction to Sales Tax. These sessions cover:
- When to collect sales tax
- How to determine the correct rate
- How to use the My DOR online portal
If You’re Unsure, Request a Ruling
If you don’t know whether your services are now taxable, you can submit a request for a ruling directly to the Department of Revenue. This will give you an official answer and help protect you from penalties later.