Washington expands retail sales tax to new services

TL;DR

Washington is pulling more services into its retail sales tax net starting October 1, 2025. That means digital ads, IT support, staffing, live events, security, custom software, and website development will now come with sales tax. If you sell these services, you’ll need to start charging tax. If you buy them, expect your costs to rise.

What changed

Washington’s Senate Bill 5814 broadens the definition of “retail sales” to pull in whole categories of services that were previously exempt from sales tax.

Starting October 1, 2025, if your business has nexus in Washington, you must charge retail sales tax on the following services when sold to Washington customers.

• Advertising services — digital ad placements and campaign services (but not newspaper, radio, TV, or billboards).
• Custom software and maintenance contracts — software maintenance agreements (whether bundled in or sold separately).
• Custom website development — website design and build projects.
• IT services — data processing, help desk support, training, and network management.
• Investigation and security services — background checks, patrols, monitoring, and armored transport.
• Live presentations — seminars, workshops, and training sessions (virtual or in-person).
• Temporary staffing services — except for certain hospital placements.

This is a summary. Full definitions and examples are available in the Washington DOR guidance.

It’s also worth noting that services also remain subject to Washington’s B&O tax, meaning many providers will now face both B&O and sales tax on the same transactions.

Learn more about Washington nexus rules in our Guide to Washington Sales Tax.

Who’s affected and what to do

• Cloud software providers: Many SaaS products were already taxable under Washington’s Digital Automated Services rules. SB 5814 clarifies this and explicitly adds custom software and software maintenance contracts to the taxable base. Review your offerings now. If you’re impacted by the new rules, get ready to charge sales tax from October 1, 2025.
• Advertising and digital agencies: Ad services are now taxable (except newspaper, TV, radio, and billboards). Update billing and contracts.
• IT and service providers (staffing, security, website dev, live presentations): These categories were previously exempt but are now taxable. Register for a permit, update invoicing, and review contracts.
• Ecommerce and retailers: Even if you don’t sell services, expect higher vendor costs for IT, staffing, advertising, and training purchased in Washington.
• Manual filers: Classification matters. Cloud software, IT, staffing, advertising, website development, live presentations, and bundled offerings must be reported correctly — a common audit trigger.

For TaxCloud users: Our system will automatically update to apply Washington’s new rules on October 1, 2025 — including service categories and sourcing rules. No manual reconfiguration is required.

Next steps

• Monitor the DOR’s rulemaking agenda for clarifications.
• Check your services: Work with a tax advisor to confirm how your services are classified under the new rules.
• Budget for higher costs on Washington-sourced services (ads, IT, staffing, etc.) — or explore sourcing them elsewhere.
• Keep an eye on other states: Maryland already taxes digital services, and more states are testing similar rules.