Washington’s expanded sales tax on services raises three separate questions: Does an older contract qualify for transition relief? Can a multistate advertising purchase qualify for an exemption? And what happens if a business missed the changes?
Each has different requirements.
1. Does a contract signed before October 1, 2025 preserve the old tax treatment?
Not automatically. ESSB 6113’s existing-contract provision, now RCW 82.04.289, defines the transition period as “beginning October 1, 2025, and ending on March 31, 2026.”
Signing before the effective date is only one condition. The statute also considers the underlying services, whether they continued after that date, and whether the contract remained unaltered during the transition. Alterations include amendments and renewals. The business’s tax-reporting election also matters.
That provision did not create permanent protection for the entire term of every older contract.
Source: RCW 82.04.289—Qualifying existing contracts
Payment timing can change the result
DOR distinguishes between qualifying contracts fully paid before October 1, 2025 and contracts with later payments.
Its guidance includes two useful examples:
- Paid in advance: An eligible IT-support contract signed and fully paid on September 30, 2025 receives the earlier tax treatment, although services continue afterward.
- Paid monthly: An eligible older IT-support agreement receives temporary relief through March 31, 2026. For reporting periods beginning April 1, 2026, DOR requires retail sales tax on the amounts received.
Review the payment history alongside the contract—not just its signature date.
Source: DOR existing-contract guidance, Examples 3–4
2. What about digital advertising used inside and outside Washington?
The multiple points of use, or MPU, exemption is a separate rule. The expiration of contract-transition relief does not eliminate other applicable exemptions.
DOR says advertising purchases may qualify when the services meet the definition of a digital automated service and are used concurrently inside and outside Washington. A campaign being described as “digital” or “national” does not establish eligibility by itself.
Source: DOR’s ESSB 5814 FAQ
MPU changes how tax is paid
Qualifying buyers provide an exemption certificate rather than paying retail sales tax to the seller. They must then “apportion and report use tax directly to the department.”
For advertising, DOR generally looks at where people view or interact with the ads to determine the Washington share. Buyers need records supporting that allocation. Bundled services can affect eligibility.
MPU therefore does not eliminate tax on the Washington portion, and it does not automatically eliminate the seller’s business and occupation (B&O) tax.
Source: DOR advertising guidance—MPU section
3. Is penalty relief available if a business missed the changes?
DOR’s ESSB 5814 Penalty Relief Program offers relief from certain penalties for businesses that voluntarily report and pay qualifying uncollected sales tax or unpaid use tax resulting from the changes.
The covered reporting periods run from October 1, 2025 through December 31, 2026. For qualifying preexisting contracts, coverage begins when temporary contract relief ends or April 1, 2026, whichever comes first.
Applications are due September 30, 2027.
DOR states: “This program only waives penalties. The tax itself and any interest still need to be paid.”
Relief requires approval and compliance with the agreement and payment requirements. Evasion, negligence, and tax-avoidance penalties are excluded. The application deadline is not permission to postpone current tax obligations.
Source: DOR ESSB 5814 Penalty Relief Program
Where should your business start?
Gather the service description, signed agreement and amendments, invoices, payment dates, and any records showing where advertising was viewed. These help establish which rules apply.
Washington Tax Desk helps businesses identify relevant official guidance and questions that may warrant further professional review.
Start with a free initial question at Washington Tax Desk.
General information, not individualized tax advice. Results depend on the facts and applicable law. Washington Tax Desk is independent of Washington DOR.