Washington Expands Sales Tax to More Services Starting October 1, 2025

Washington State is making a major change to its tax code: starting October 1, 2025, more business services will be subject to the state’s retail sales tax. For service providers and their clients, this expansion could mean higher costs and new compliance obligations.

What Happened

• Washington passed ESSB 5814, broadening the scope of services classified as “retail sales.”

• Newly taxable services include a range of professional, personal, and technical services that were previously exempt.

• The change takes effect on October 1, 2025.

• Businesses offering these services will be required to:

  • Collect and remit retail sales tax.

  • Update invoices and contracts to reflect new taxable amounts.

  • Register with the Department of Revenue if not already doing so.

Why It Matters

1. For Service Businesses: Providers may need to adjust billing systems, contracts, and client communications to account for sales tax.

2. For Consumers: Costs for affected services will increase as sales tax is added to previously tax-free invoices.

3. For Compliance: Failure to collect sales tax properly can create liability for both unpaid tax and penalties.

4. For Advisors: CPAs must help clients identify whether their services fall within the newly taxable categories.

Implications for CPAs and Businesses

• Taxability Reviews: Service providers should review their offerings against the new Department of Revenue guidance.

• Client Communication: Businesses should prepare to explain the tax changes to customers to avoid confusion over price increases.

• Multi-State Businesses: Firms operating across state lines must coordinate compliance strategies to manage differing state sales tax rules.

• Cash Flow Planning: Businesses should assess whether pricing adjustments are needed to absorb or pass through the added tax.

Looking Ahead

Washington’s move reflects a broader trend: states increasingly expanding sales tax bases to services, not just goods, to boost revenue. Businesses should expect this trend to continue nationwide. For CPAs, the challenge is clear—proactive planning and client education will be critical.

Stay Ahead of State Tax Shifts

Sales tax expansions can catch businesses off guard, especially in service industries.

👉 Try Bizora today to track evolving state and local tax changes and guide your clients with confidence.