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More Services Subject to Sales Tax in Washington

Michael Bernard outlines Washington’s expansion of sales tax to more service categories.

Vertex Inc.

In a move designed to close a projected $16 billion budget gap, Washington State has enacted a package of new tax measures, including an extension of the retail sales tax to a range of business, personal and professional services. The Evergreen State currently imposes a 6.5% sales and use tax rate on retail sales. Businesses in the newly covered service categories must begin collecting the tax on October 1st of this year. 

The services that are now subject to sales tax include: 

  • Information technology services, including IT training, technical support, help desk services, data entry services and data processing services.
  • Custom website development services, including website design and support.
  • Investigation, security and armored car services, such as background checks, security guard and patrol services and transportation of cash and valuables. (Locksmith services are excluded.)
  • Temporary staffing services on a contract or fee basis; this excludes, however, provision of certain workers to hospitals.
  • Advertising services, including layout, art direction, graphic design and acquisition of advertising space. Notably, some online and digital advertising services, such as search engine marketing and web campaign planning, are included. However, the legislation excludes web hosting and domain name registration services, certain print and broadcasting services and some types of out-of-home advertising such as billboard and transit advertising.
  • Live presentations, including lectures, seminars, workshops and courses, whether delivered in person or online.
  • Custom software and customization of prewritten software, regardless of the method of delivery to the end user.

Additionally, the new law introduces a one-time sales tax prepayment requirement for retailers with $3 million or more in taxable sales in the calendar year 2026. These businesses must prepay 80% of the liability by June 25, 2027. Failure to make the payment by the due date will result in a one-time 10% penalty, as this Eide Bailley report notes. Again, sellers will need to start collecting sales tax on these services starting Oct. 1. Washington’s Department of Revenue plans to provide additional guidance on the new business activities subject to sales tax here.

Washington’s taxation of more services is noteworthy. Other states will likely evaluate these changes as a potential model to follow, especially if they find themselves contending with similar fiscal pressures.

PLEASE REMEMBER THAT THE VERTEX BLOG PROVIDES INFORMATION FOR EDUCATIONAL PURPOSES, NOT SPECIFIC TAX OR LEGAL ADVICE. ALWAYS CONSULT A QUALIFIED TAX OR LEGAL ADVISOR BEFORE TAKING ANY ACTION BASED ON THIS INFORMATION. THE VIEWS AND OPINIONS EXPRESSED IN THE VERTEX BLOG ARE THOSE OF THE AUTHORS AND DO NOT NECESSARILY REFLECT THE OFFICIAL POLICY, POSITION, OR OPINION OF VERTEX INC. ⁠

Explore more resources from our industry influencers:

Michael J. Bernard, Chief Tax Officer – Transaction Tax at Vertex Inc. Vertex's Chief Tax Office (CTO) provides insight regarding the impact of tax regulations, policy, enforcement, and emerging technology trends on global tax department operations.

Michael J. Bernard

Chief Tax Officer, Transaction Tax

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Michael Bernard is the Chief Tax Officer of Transaction Tax. In his role, he provides insight and thought leadership around tax department operations, U.S. indirect tax, tax risk management, and tax policy, as well as emerging tax trends. He is an executive-level tax attorney with a diverse portfolio of experience in corporate tax, administration, and finance, including a substantive knowledge of U.S. and international tax laws.

Prior to joining Vertex, Michael was in various tax leadership roles at Microsoft Corporation for 28 years, the most recent being Senior Director – Tax Counsel. Michael led teams in the following functional areas: direct and indirect tax controversy, sales and use, business license, property, tax IT, SOX, and telecommunications. He also co-led a corporate taxpayer advocacy group with the Washington Department of Revenue and was a Director on the Board of the Washington Research Council. Michael has also testified before administrative and lawmakers at both the federal and state level.

Michael earned both a J.D. and a Bachelor of Science in Business Administration from Creighton University. He is a part-time lecturer of Law in the LLM program at the University of Washington School of Law. Michael also served on the board of directors, executive committee, and chaired committees for The Tax Executives Institute (TEI) for nearly 25 years.

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