Effective October 1, 2025
The State of Washington has passed a new law (ESSB 5814, Chapter 422, Laws of 2025) that makes most advertising services taxable as retail sales. This is a significant change: previously, advertising services were exempt from sales tax.
What’s Now Taxable (Advertising Services)
If your business creates, prepares, produces, or disseminates advertisements for Washington clients, these charges are subject to sales tax and retailing B&O tax:
- Layout, art direction, graphic design, mechanical preparation
- Production supervision and placement of ads
- Referrals and acquisition of advertising space (including digital)
- Advising clients on the best methods of advertising
- Online referrals, search engine marketing (SEM), lead generation optimization
- Campaign planning, web campaign management
- Acquisition of internet media ad space
- Monitoring and evaluation of website traffic when tied to ad campaign effectiveness
What’s NOT Taxable as Advertising Services
The following activities remain exempt from this new rule:
- Web hosting and domain name registration
- Newspaper advertising
- Printing & publishing
- Radio & TV broadcasting within Washington
- Out-of-home advertising, such as:
- Billboards, bus shelters, street furniture
- Transit ads (bus, train, etc.)
- In-store displays and point-of-sale ads
- Dynamic/static signage at live events
- Naming rights
- Fixed signage advertising
Who Is Affected
- Washington Clients: Sales tax applies when the customer receives the service in Washington (destination-based sourcing).
- Out-of-State Clients: Not subject to WA sales tax, but revenue must still be apportioned correctly for B&O tax purposes.
Special Note on Media Spend
- Direct platform buys (Facebook, Google, etc.) → These companies will need to charge WA sales tax to Washington advertisers.
- Agency pass-through of media spend → To avoid “double taxation,” agencies must clearly treat media buys as client reimbursements (with agency-of-record documentation). If billed as part of bundled services, the entire amount could be subject to sales tax.
Action Steps for Agencies
- Review contracts & invoices – Separate taxable ad services from non-taxable items (like hosting or pure reimbursements).
- Update billing systems – Be ready to collect WA sales tax starting October 1, 2025.
- Identify Washington clients – Only services delivered to WA customers are affected.
- Communicate with clients – They will see sales tax added to invoices for the first time.
Bottom Line
Starting October 1, 2025, Washington will apply sales tax and retailing B&O tax to most advertising services. Agencies should prepare now by adjusting contracts, invoicing, and client communications to avoid compliance issues and unexpected double taxation.
