Washington Expands Sales Tax to More Services: What Nonprofits and Small Businesses Need to Know

If your organization provides services in Washington, a new law may affect how you bill and what your clients pay. In May 2025, the Washington State Legislature passed Engrossed Substitute Senate Bill (ESSB) 5814, which significantly expands the types of services subject to sales tax.

Beginning October 1, 2025, Washington will start taxing many professional, digital, and event-related services that were not previously treated as retail sales. The change is part of a broader effort to modernize the tax system and reflect today’s service-based economy.

What Changed

ESSB 5814 broadens the definition of what Washington considers a taxable “retail sale.” The law removes an older rule that excluded services primarily involving human effort and now includes many more types of services within the retail sales tax structure.

According to the Washington Department of Revenue and legislative summaries, this could include advertising and marketing work, IT support and software customization, website development, live trainings, workshops, and temporary staffing or security services. While there are a few exceptions for hospitals, schools, and certain nonprofit activities, most service providers will now need to collect and remit sales tax on these activities. Clicking here takes you to a somewhat helpful chart that the Department of Revenue set forth showing what services are subject to tax after the passage of this bill.  

Why It Matters

For nonprofits, community organizations, and small service-based businesses, this change will likely mean adjusting how services are priced, billed, and reported. Vendors who operate in Washington may begin adding sales tax to invoices where they did not before. Organizations that host workshops, trainings, or consulting sessions in Washington could now need to register with the Department of Revenue. Even out-of-state organizations may be affected if they deliver services to Washington clients and meet the state’s “economic nexus” thresholds.

These updates also mean that budgets and contracts should be reviewed before October. If your engagements span the implementation date, it will be important to confirm which party is responsible for collecting or paying sales tax.

Preparing for the Change

Now is the time to look closely at your service offerings and partnerships in Washington. Consider how these changes might affect your organization’s operations, especially if you provide training, education, or consulting to Washington audiences. Checking with your accountant or bookkeeper can help clarify whether you need to register or adjust your invoicing practices.

Even if your organization is based outside Washington, this new law may apply to you if you regularly serve clients in the state. It is also wise to anticipate higher costs if your vendors begin adding tax to their services.

Staying Resilient in Changing Policy Waters

This update is one more example of how quickly the policy and regulatory environment can shift. Understanding your obligations early helps your organization stay compliant and confident. If you need help reviewing your contracts, partnership agreements, or program plans to prepare for these changes, Narwhal Law & Strategy can help you take clear, informed next steps. We’d love to schedule a consult with you at your convenience. 

Disclaimer: Narwhal Law & Strategy does not provide tax, accounting, or financial advisory services. This information is for general educational purposes only and should not be taken as legal or tax advice. Organizations should consult a qualified accountant or tax professional regarding how these changes apply to their specific situation.