washington business
Hastily Passed Sales Tax Hits Businesses
New sales tax on services is squeezing budgets and raising costs for small businesses.
Jacqueline Allison
At A Glance
In 2025, the Legislature expanded the state’ s retail sales tax to a broad range of services, including digital advertising, IT and website services, temporary staffing, security, and live presentations.
This major sales tax change, which was fast-tracked through the Legislature and began in October, caught many businesses off-guard.
In the 2026 legislative session, lawmakers voted to repeal most of the sales tax on services law( excluding advertising, where the new tax will remain) starting Jan. 1, 2029. This tax relief was included in a bill that creates a new state income tax on households earning more than $ 1 million annually, which will impact many small- and mediumsized business with pass-through income.
In AWB’ s employer survey in January, three-quarters of respondents said they were paying either the new sales tax or higher B & O tax rates.
Ashley Stone( right), managing partner of Express Employment Professionals in Olympia, said the state’ s new sales tax on retail services, including temporary staffing, was rolled out very hastily and has been a hit to her business.
When Washington’ s new sales tax on services began last fall, Seattle-based advertising and public relations agency GreenRubino worried most about the impact on clients. Many wouldn’ t have room in their budgets to absorb a nearly 11 % increase in costs for digital advertising, now subject to the sales tax.
The agency works with businesses in industries ranging from food and beverage to health care and manufacturing. The added tax has made it more expensive for those clients to market their businesses online.
“ Our smaller clients are experiencing the biggest impact,” said John Rubino, partner at Green- Rubino.“ They had small budgets to begin with. They’ ve got big goals, small budgets, and now their budgets are even less.”
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