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Washington to Tax Advertising Services Starting October 2025

By Sonjia Barker |

With the passage of ESSB 5814, Washington will become one of the few states to impose sales tax on advertising services. Beginning October 1, 2025, businesses providing these services will be required to collect Washington retail sales tax and report income under the Retailing Business & Occupation (B&O) tax classification.

This change may significantly impact businesses that market or advertise to Washington-based customers.

What Counts as “Advertising Services”?

The new law defines advertising services broadly to include digital and non-digital activities related to creating, preparing, producing, or disseminating advertisements. Examples include:

  • Layout, art direction, graphic design, production supervision

  • Placement of ads, referrals, acquisition of advertising space, and consulting on advertising methods

  • Online referrals, search engine marketing, and lead generation optimization

  • Web campaign planning, online ad space acquisition, and website traffic analysis for ad effectiveness

What’s Not Included?

Some activities remain outside the scope of the new tax. These are not considered advertising services:

    • Web hosting or domain registration

    • Advertising in newspapers, printed materials, radio, or television

    • Out-of-home advertising (billboards, transit, in-store displays, event signage, naming rights)

    • Direct mail advertising

    • Advertising services sold to members of the same affiliated group (with at least 50% common ownership)

What This Means for Your Business

If you provide advertising services to Washington customers, you may need to:

  1. Collect Washington retail sales tax beginning October 1, 2025.

  2. Report gross receipts under the Retailing B&O tax classification instead of the Service and Other Activities tax classification.

Because the rules leave some ambiguity—especially in complex service arrangements—it’s important to carefully review how this change may apply to your business.

How We Can Help

Our team is closely monitoring guidance from the Washington Department of Revenue and will continue to share updates as more details become available. We can help you:

  • Assess your services for taxability

  • Update invoicing and tax reporting processes

  • Stay compliant with the new requirements

If you have questions about how this change impacts your business, please contact our state and local tax (SALT) shareholder, Sonjia Barker.