Washington State Enacts New Retail Sales Taxes on Business Services Starting October

Starting October 1, Washington businesses will be required to collect new retail sales taxes on an expanded range of services, including advertising, live presentations, information technology, and custom website development, following the passage of Engrossed Substitute Senate Bill 5814 by the 2025 Washington Legislature. The Washington Department of Revenue is preparing guidance for affected businesses, but critics, such as Sen. John Braun, argue the law is vaguely defined and rushed, potentially causing higher living costs for residents and confusion for businesses. Braun emphasizes that the sales tax hike is compounded by an increase in the business-and-occupation tax rate, projected to raise $5.6 billion from employers over four years. While Republicans warn of broad interpretations of taxable activities, including entertainment, education, and safety training, Democrats defend the tax increases as necessary to address inflation and fund government services. The compressed timeline for implementation has drawn criticism, as the Department of Revenue has only weeks to finalize rules before enforcement begins. Businesses are advised to prepare promptly to ensure compliance and avoid penalties.