Effective October 1, 2025, Washington will begin imposing retail sales tax on a broader array of services, including digital advertising. This change, enacted through Senate Bill 5814, amends RCW 82.04.050 to expand the definition of “retail sale” to include various digital and technology-related services.
What’s Covered?
The amended statute encompasses digital advertising services as well as a wide range of other activities, including
- Information technology training services
- Network operation support
- Data entry services
- Data processing services
- Search engine marketing
- Security services
- Security system monitoring
- Background checks
- Temporary staffing services
- Live presentations online or in-person
These services will be taxed at the state’s standard retail sales tax rate of 6.5%, plus any applicable local rates. For example, in Seattle, the combined sales tax rate reaches 10.35%, which will apply at the point of sale.
What’s Not Covered
Traditional advertising channels remain exempt, including:
- Newspapers (RCW 82.04.214)
- Printing or publishing (RCW 82.04.280)
- Radio and television broadcasting
- Billboards
Potential Legal Challenges
The distinction between digital and traditional media may invite constitutional scrutiny. Although the law is set to take effect on October 1, 2025, Maryland’s 2021 digital ad tax has encountered sustained legal opposition. Legal scrutiny has centered on whether such laws violate the federal Internet Tax Freedom Act (ITFA), which prohibits discriminatory taxes on electronic commerce, in addition to raising broader constitutional questions.
Navigating the New Law
To prepare for compliance and minimize risk, Washington businesses should consider the following steps:
- Review contracts to determine which party is responsible for the tax
- Adjust pricing models to account for the new tax burden
- Identify services that fall within the scope of the new law
- Stay informed about potential legal developments, especially any litigation affecting the law’s enforcement
While the law is currently set to take effect, the law’s viability may ultimately hinge on how courts interpret its alignment with federal law. Our team can help with any business tax related questions or disputes. Contact our office today at info@beresfordlaw.com or by phone at (425) 776-4100. to discuss your options.