Washington to Begin Collecting Sales Tax on Services Starting October 1, 2025

What You Should Do Now

To prepare for October 1:

Review your service offerings
Determine which of your services might now be subject to sales tax under the expanded definition.
Update billing and systems
Ensure your invoicing software or accounting system can calculate and display the correct Washington sales tax.
Communicate with clients
Let clients know in advance that services may now carry sales tax, so there are no surprises.
Examine existing contracts
Identify contracts signed before October 1 and determine how payments and service delivery interact with the new rules.

Stay current on guidance

Washington’s Department of Revenue will issue formal guidance and additional rules in the lead-up to the effective date.

Big change is coming to Washington’s sales tax rules. Beginning October 1, 2025, many services that were previously exempt will now be considered “retail sales” and subject to sales tax under ESSB 5814.

What About Contracts Signed Before October 1?

Washington’s Department of Revenue has issued interim guidance about how to treat existing contracts executed before October 1, 2025.

Key points:

If a contract was signed and fully paid before October 1, even if services are delivered afterward, the transaction is deemed to occur before the tax change. That means no new sales tax is required on that contract.

If a contract was signed before October 1 but not fully paid by that date, and the contract is not altered, providers may delay applying the new tax treatment until March 31, 2026. After that, tax collection would be required.

However, if you alter or amend an existing contract after October 1 in a material way (changing scope, adding services, etc.), the contract becomes taxable at the time of that alteration.

This guidance is labeled “interim,” meaning it could be updated when final rules are published.

What’s Changing — The New Taxable Services

Under the new law, the following types of services must begin collecting sales tax (if otherwise taxable under state/local rules) :

Advertising services (digital and non-digital)
Information technology services (e.g. help desk, network support, data processing)
Custom software development and customization of prewritten software
Custom website development and related support
Live presentations (seminars, workshops, virtual lectures)
Temporary staffing services
Investigation, security, and armored car services

In addition, the law removes certain exclusions from Digital Automated Services (DAS) categories, meaning services that had previously been excluded (e.g. those involving human effort or live presentations) may now be taxed under the DAS umbrella.

One important carve-out: telehealth and telemedicine services remain excluded from DAS taxation under the new law.