- Washington State updates tax structure for digital services effective October 1, 2025
- Digital services now subject to retail sales tax and reclassified for B&O tax
- Affected sectors include IT, software, web development, and digital advertising
- Retail sales tax expanded to include IT services, custom website development, software sales, and advertising
- Digital service providers’ income now falls under Retailing B&O classification
- New B&O rate tiers for Service & Other Activities:
- Less than $1M: 1.5 percent
- $1M to $4.999M: 1.75 percent
- $5M or more: 2.1 percent
- Businesses must collect and remit retail sales tax and report under Retailing B&O
- Need to allocate income between Retailing and Service & Other Activities
- Suggested actions: review pricing systems, determine classification boundaries, model tax impact, stay informed via DOR updates
Source: thompsontax.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
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