The Washington legislature is considering major changes to its sales tax laws. Senate Bill 5814, which passed the Senate on April 19th, is currently under consideration in the House of Representatives. The bill would expand the scope of services and software that are subject to sales tax. If passed, both sales tax and B&O tax would, effective October 1, 2025 apply to:
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Custom software and software customization services
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Information technology technical consulting services, technical training and support
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Website development
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Investigation, security services, security monitoring services, and armored car services
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Temporary staffing and advertising services (with some exclusions)
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Any service that primarily involves the application of human effort by the seller; including live presentation, digital advertising and digital processing (excluding tele-medicine and tele-health)
The bill would also impose a requirement for businesses who make $3 million or more in retail sales during calendar year 2026 to make a one-time prepayment of sales tax in June 2027 equal to 80% of the state sales tax collected and remitted during the June 2026 reporting period. It would also, effective 1/1//2027, expand the definition of tobacco products to include all items that contain nicotine excluding FDA approved nicotine cessation medications. Finally, the bill would impose an additional tax on the sale of cigarettes at a rate of 10 cents per cigarette.
