Do I Need to Collect Sales Tax in Washington? A Guide for New Businesses

Sales tax is where many new Washington businesses get into trouble, often because they assume it only applies to stores selling physical products. In Washington, it's broader than that.

What's taxable in Washington?

Retail sales tax generally applies to:

• Sales of tangible goods to end consumers
• Many services that Washington defines as retail sales, including:
  • Construction, repair and remodeling of buildings and other property
  • Landscaping and certain cleaning services
  • Repair of tangible personal property (for example, auto or appliance repair)
  • Digital products and digital automated services

The 2025 expansion to more services

Starting October 1, 2025, a new law known as ESSB 5814 expanded sales tax to additional services, including:

• Advertising services (with some exceptions)
• Information technology services
• Custom software and custom website development
• Investigation, security and armored car services
• Temporary staffing services
• Live presentations

If you sell any of these, you may need to collect sales tax now even if you didn't before. Check the Department of Revenue's page on services newly subject to sales tax.

What's generally not subject to sales tax?

Many professional and personal services are not retail sales, such as accounting, legal services, medical services, and many consulting services. These still pay B&O tax under the service classification.

Washington's rates are destination-based

Washington's sales tax rate is the state rate plus the local rate where the customer receives the goods or service. For a contractor, that's usually the job site. For shipped products, it's the delivery address. Rates vary by city and county and change periodically, so use the Department of Revenue's tax rate lookup tool.

Buying for resale

If you buy items you'll resell or incorporate into a product you sell, you may be able to buy them without paying sales tax by giving the seller a reseller permit. You can't use it for supplies you consume yourself.

Use tax

If you buy taxable items for your business and the seller didn't charge Washington sales tax (common with out-of-state online purchases), you may owe use tax at your local rate. Report it on your excise tax return.

How to collect and report

1. Make sure you're registered for sales tax with your business license
2. Add the correct sales tax to invoices
3. Keep the tax collected separate from your revenue (it isn't your money)
4. Report it on your excise tax return by location code
5. Pay it on time

Common sales tax mistakes

• Treating collected sales tax as income and spending it
• Charging the rate where your office is instead of where the customer is
• Not charging tax on labor for repair and construction services
• Ignoring use tax on online purchases

The bottom line

In Washington, sales tax applies to more than retail stores. If you do construction, repair, IT, advertising or other newly taxable services, confirm your obligations early. Collected sales tax belongs in a separate account until you file.

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Need help getting this right? TRIG Bookkeeping & Tax Services helps new business owners in Washington with company registration, monthly and annual bookkeeping, and government compliance. Contact us to talk about your business.

This article is general information, not legal or tax advice for your situation. Tax rules and fees change, so confirm current details with the IRS, the Washington Department of Revenue, or a qualified professional.