Washington state expands Sales Tax to digital Services from 1 October 2025
Washington State’s recently enacted Senate Bill 5814, signed into law on 20 May 2025, expands the range of digital service subject to 6.5% Sales Tax (further local taxes may be due), changes the place of supply rules and a single settlement payment. The new obligations come into effect on 1 October 2025.
Maryland digital services sales tax rules are also being updated from July 2025. Follow US sales tax digital services tracker.
Expansion to digital advertising, IT, live webinar
The bill significantly broadens the definition of “retail sale” to include numerous service categories. Newly taxable services include:
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Advertising services, both digital and non-digital (excluding certain exempted formats such as newspapers, broadcast, and live events)
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Information technology services, including technical support, consulting, training, and data entry
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Custom website development
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Temporary staffing services
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Security and investigation services, including monitoring and armored car transport
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Custom and customized prewritten software
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Live presentations such as seminars and webinars
Notably, digital automated services—previously taxable—are now more broadly defined. The bill eliminates the “human effort” exclusion, meaning that even services heavily reliant on human input will be taxed if delivered digitally. This raises legal red flags, particularly with regard to digital advertising, as critics argue it may violate the federal Internet Tax Freedom Act by singling out internet-based services for taxation.
New place of taxation rules
In addition to expanding the sales tax base, SB 5814 introduces new sourcing rules, requiring businesses to tax services based on where the customer first uses the service. This adds complexity to compliance, especially for businesses offering digital services across state or national borders.
One-Time Prepayment Requirement
The legislation also introduces a one-time sales tax prepayment requirement. Businesses with $3 million or more in taxable retail sales during calendar year 2026 must prepay 80% of their June 2026 state sales tax liability by 25 June 2027. This amount will be credited against taxes due on 26 July 2027. Late payments face a 10% penalty, though waivers may be granted in cases where actual June 2027 sales are significantly lower than the prior year.
