Washington’s service tax applies to all companies doing business in the state. What’s new is that starting October 1, 2025, the state will tax some advertising services as retail sales. The new law, ESSB 5814, means that if you sell digital advertising, you’ll need to collect that tax on your invoices.

Let’s walk through what’s changing, which services fall under the new rule, and what this means for your bookkeeping.

What’s Changing About Washington’s Service Tax in October 2025

Until now, most advertising services in Washington have only paid the state’s business and occupation (B&O) tax. Beginning in October, the state will also treat those services as retail sales.

If you’re running a digital marketing business in Washington, you’ll need to collect sales tax from your clients for any advertising services, and you still owe the B&O tax, too.

What Services Count as Advertising Under the New Law?

The Department of Revenue gives a wide range of examples, including:

• Layout, design, and production of ads
• Digital campaign planning and placement
• Search engine optimization (SEO) and lead generation
• Measuring website traffic or other analytics to track ad effectiveness

So if you’re a Washington state business offering online marketing, design, or digital ad management, this new tax likely applies to you.

What Services Are Exempt from the New Services Tax

Traditional advertising services are not a part of Washington’s service tax. For example:

• Publishing (newspapers and magazines)
• Radio and TV broadcasting
• Billboards, transit ads, in-store displays, signage, naming rights
• Web hosting and domain registration

What This Means for Bellevue Small Businesses

As a Bellevue bookkeeper, I’m telling you to notify your clients and update your systems by October 1. Make sure your bookkeeping system can handle both sales tax collection and B&O reporting.

If you’re buying advertising services (say you own a local café and hire someone to run digital ads), expect sales tax to be added to your invoice. That means your marketing costs will increase, so it’s smart to adjust your budget now.

What About Out-of-State Clients?

Here’s where sourcing rules come in. Washington’s service tax is based on where the service is received or where ads are shown to viewers. If both your client and their audience are outside Washington, the sale is considered out-of-state, and Washington tax does not apply. But if either the client is in Washington or the ads are shown to viewers here, you’ll need to collect the tax. Keep good documentation—like contracts, placement instructions, or targeting reports—to back up your records.

New Washington Service Tax FAQs

Q: Does this include social media content?

Boosted posts and sponsored ads are clearly advertising, but what about paying someone to create regular posts? Since the Department of Revenue describes digital advertising services broadly, it’s best to ask your accountant how this applies to your business.

Q: What if my clients are outside Washington?

Washington uses “destination-based sourcing.” If both your client and their ad audience are out of state, Washington sales tax does not apply. If either one is here, you’re looking at a taxable sale.

Q: Will Washington’s new tax include radio, TV, or billboards?

No. Broadcasting and out-of-home advertising do not fall under the new tax rules.

Getting Your Books Ready for the October 2025 Tax Change

If Washington’s new tax law applies to you, be sure you’re invoicing and bookkeeping systems are ready. And if you’re on the customer side, know that your costs will go up.

The rules around organic content remain a little vague, and out-of-state sourcing adds another wrinkle. The safest move is to check with your accountant about how these changes apply to your business.

And if you’d like help preparing your books for the change, I’d be glad to support you. Small business bookkeeping is what I do every day, and it’s often the little adjustments now that save the biggest headaches later.

Schedule a complimentary 30-minute consultation, and let’s make sure you’re ready.

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Note: This blog article is for informational purposes only and should not be considered legal, financial, or tax advice. Please consult a qualified professional for personalized advice tailored to your business needs.