Is temporary staffing subject to Washington sales tax? (ESSB 5814)

Sources checked Oct. 14, 2026. Washington Tax Desk is independent of the Washington Department of Revenue (DOR) and is not a CPA or law firm.

Quick answer

Since Oct. 1, 2025, ESSB 5814 (ch. 422, Laws of 2025) has generally made temporary staffing services a retail sale in Washington, with some exceptions. DOR says businesses providing these services report under retailing B&O tax (if not for resale) and "are also required to collect and remit retail sales tax." Exceptions include certain hospital placements, resale in certain circumstances, and, since July 1, 2026, purchases by public libraries, K-12 schools, school districts and similar public education bodies.

At a glance

What counts as temporary staffing

RCW 82.04.050(3)(j) defines "temporary staffing services" as "providing workers to other businesses, except for hospitals licensed under chapter 70.41 or 71.12 RCW, for limited periods of time to supplement their workforce and fill employment vacancies on a contract or for fee basis."

DOR's interim guidance statement (Sept. 17, 2025) says it "will consider whether the taxpayer meets all of the following factors": the taxpayer recruits and hires its own employees; finds other organizations that need them; assigns them temporarily "all under the direction and supervision of the customer"; and "customarily attempts to reassign the employees to other organizations when they finish each assignment."

DOR says direct hires, independent contractors, qualifying paymaster arrangements and outsourced services (such as a third-party call center that manages its own staff) do not meet these factors. DOR's guidance does not specifically discuss professional employer organizations (PEOs) or permanent-placement fees, so this page does not say how those are treated; that depends on the facts.

What is taxed

DOR: "The taxable amount for temporary staffing services includes all fees, temporary staff wages, and other employee costs paid as part of a temporary worker's assignment." DOR says these amounts are not deductible as advancements and reimbursements. Sales tax is destination-based: based on where the customer receives the service; DOR says that for workers stationed in person at the customer's location, "the sales tax may be sourced to that location."

Resale

DOR: "Yes, in certain circumstances. Sellers of these services may use a reseller permit when subcontracting with a third-party service subcontractor in certain situations. However, providers must maintain documentation to substantiate that the services qualify for resale."

DOR's Example 18 (quoted exactly): "Sublime Subs will not charge Great Heights Construction Company retail sales tax for the temporary staff that it sends to install the drywall. Sublime Subs will pay wholesaling B&O tax on the income it receives from Great Heights Construction Company for the temporary staff. Great Heights will collect retail sales tax from the property owner on the total contract price which includes all of the subcontractors, Sublime Subs, charges."

Schools and libraries (from July 1, 2026)

ESSB 6346 §1102 says sales tax "does not apply to sales of" temporary staffing (and certain other services) to "public libraries, library districts, library service centers, K-12 schools, school districts, and educational service districts." DOR says buyers must use DOR's exemption certificate starting July 1, 2026, and sellers keep a copy for five years. DOR's notice does not address private schools, so whether a particular school qualifies depends on the facts.

Worked examples (illustrative only)

These use made-up round numbers and an example 10% sales tax rate chosen only for arithmetic. Real rates depend on the location; use DOR's rate lookup.

1. Office temp for a business. A staffing firm bills a Washington business $10,000 for a temp's wages plus its fee. Using the example 10% rate, the firm collects $1,000 sales tax and reports $10,000 under retailing B&O. (Wages are included per DOR.)
2. Same temp, public school district, after July 1, 2026. The firm bills $10,000 and receives DOR's exemption certificate. No sales tax is collected; the firm still reports retailing B&O and takes DOR's "Sales of Exempt Services to Libraries and Schools" deduction from retail sales tax.
3. Contractor resale (like DOR Example 18). A staffing firm bills a construction contractor $10,000 for drywall labor and receives a valid reseller permit. The firm charges no sales tax and reports wholesaling B&O; the contractor collects sales tax from the property owner on its total contract price.

Penalty relief

DOR's ESSB 5814 Penalty Relief Program covers uncollected retail sales tax and unpaid use tax caused by ESSB 5814 for reporting periods from Oct. 1, 2025, through Dec. 31, 2026; applications must be submitted by Sept. 30, 2027. DOR: "This program only waives penalties. The tax itself and any interest still need to be paid." Evasion, negligence and tax avoidance penalties are not eligible.

What's next

DOR's guidance on these services is largely in interim guidance statements, which DOR says apply until it issues final guidance.

ESSB 6346 (ch. 238, Laws of 2026, §§1001 and 1003) is scheduled to remove most of these services, but not advertising services, from the retail sale definition on Jan. 1, 2029; that change depends on the bill's new income tax surviving court review (§1202).

FAQ

Do staffing agencies charge sales tax in Washington? Generally yes, since Oct. 1, 2025, when they provide temporary staffing services to a consumer, unless an exclusion or exemption applies (DOR IGS).

Is the worker's wage part of the taxable amount? Yes. DOR says the taxable amount "includes all fees, temporary staff wages, and other employee costs."

Can a business buy temporary staff for resale? In certain circumstances, with documentation, such as a contractor using a reseller permit in DOR's Example 18.

Are schools exempt? From July 1, 2026, public libraries, library districts, library service centers, K-12 schools, school districts and educational service districts are exempt with DOR's exemption certificate. DOR's notice does not address private schools, so whether a particular school qualifies depends on the facts.

Is hiring a temp directly taxable? No. DOR says direct hiring, "whether on temporary or permanent basis," is not a retail sale or temporary staffing service.

Sources

• RCW 82.04.050(3)(j)
• DOR, Interim guidance statement regarding changes made by ESSB 5814 for Temporary Staffing Services (Sept. 17, 2025)
• DOR special notice, New sales/use tax exemption for purchases of certain retail services by schools and libraries (Apr. 3, 2026)
• DOR special notice, Temporary staffing services: Modification to exclusion from retail sales for staff provided to hospitals (Apr. 3, 2026)
• DOR, ESSB 5814 Penalty Relief Program
• ESSB 6346, ch. 238, Laws of 2026 (§§1001, 1003, 1101–1107, 1202)
• DOR, Services newly subject to retail sales tax

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General information, not individualized tax advice. Results depend on the facts and applicable law. Washington Tax Desk is independent of Washington DOR.