WA Employers: New Sales Tax on Services is Unfair and Unclear

From AWB:

Gathering feedback: In July, the state Department of Revenue held 10 listening sessions and launched a survey following the fast-tracked passage of Senate Bill 5814. The law, effective Oct. 1, significantly expands the state’s sales tax, applying it to range of services including advertising, IT, custom website development and more. (For background, see AWB’s issue brief.)

Key concerns: In feedback sessions and surveys, many expressed confusion and concern over the law’s ambiguous definitions, administrative burdens, and competitive disadvantages — especially for small businesses. Read more in DOR’s report.

• Temporary staffing: Employers want clear definitions (i.e. what counts as “temporary”) and the ability to deduct wages, benefits and payroll taxes.

• Advertising services: Many raised concerns about economic harm to Washington state businesses. "Clients could easily hire an out-of-state contractor and avoid this tax entirely,” one survey respondent wrote.

• Live presentations, IT & web services, software, and security services: Businesses want narrow definitions, educational and nonprofit exemptions, practical sourcing rules, and clear guidance.

What’s next: The department’s goal is to provide interim guidance by early September. To share additional feedback and concerns, please reach out to AWB Tax & Fiscal Policy Director Max Martin.