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Washington Millionaires Tax

Implementation watchSource checked: 2026-05-26

Watch: DOR implementation, advisory reports, litigation

What the bill report says

  • ESSB 6346 imposes a 9.90% tax beginning January 1, 2028.
  • The final bill report says only individuals are subject to payment of the tax.
  • The first tax payments and returns begin in calendar year 2029.

Sources: ESSB 6346 final bill report · ESSB 6346 bill text as passed

Why this matters

ESSB 6346 is not just an income-tax bill. Its legislative materials connect the new revenue source to tax relief, including changes to sales and use taxes, the small business B&O credit, and other relief provisions scheduled around the 2029 implementation period.

The issues behind the headline rate

  • Washington base income — starts from federal AGI, then applies Washington-specific modifications.
  • Standard deduction — a $1 million standard deduction, with a combined limit for spouses or domestic partners.
  • Deductions and addbacks — charitable deductions, capital construction fund treatment, wagering loss treatment, cannabis 280E-related deductions, and pass-through entity tax addbacks.
  • Credits — for certain taxes paid to other states, B&O or public utility tax paid on the same income, and Washington capital gains tax paid on capital gains taxed under the bill.
  • Nonresidents — Washington-source income assigned through allocation and apportionment, including workday-based compensation sourcing and receipts-factor concepts for business income.
  • Pass-through election — pass-through entities may elect entity-level payment, with owners receiving a credit for their share.

Retail-services connection

The ESSB 6346 final bill report states that sales and use taxes for retail services included under ESSB 5814 are repealed effective January 1, 2029, except advertising services. See the retail-services tracker.

Relief provisions to track with the new tax

  • Expanded Working Families Tax Credit eligibility beginning in 2029.
  • Sales and use tax exemptions for diapers, over-the-counter drugs, and grooming or hygiene products beginning in 2029.
  • Small business B&O credit and annual filing threshold increases beginning in 2029.
  • Repeal of most ESSB 5814 retail-services sales and use taxes effective January 1, 2029, except advertising services.

Implementation timeline

  • January 1, 2028 — tax imposition begins.
  • Calendar year 2029 — first payments and returns begin; several relief provisions take effect.
  • December 15, 2026 — initial advisory group report date.
  • December 15, 2027 — final advisory group report date.
  • DOR implementation — watch for forms, rules, advisory group output, and filing mechanics.

Constitutional / litigation risk

ESSB 6346 says that if a court of final jurisdiction invalidates the income-tax section, the covered provisions of the act are null and void. Treat this as an active risk area, not a settled planning assumption. A referendum or litigation headline is not the same as a final merits decision — keep implementation timeline, referendum status, and constitutional litigation status in separate buckets.

Watchlist

  • DOR implementation — forms, filing mechanics, rules, safe harbors, and taxpayer instructions still need detail.
  • Advisory group reports — initial report due December 15, 2026; final report due December 15, 2027.
  • Litigation and referendum posture — track separately from DOR implementation.
  • Retail-services relief — the scheduled 2029 relief affects most ESSB 5814 retail services but preserves advertising services.

FAQ

Is the tax due now? No. The tax is imposed beginning January 1, 2028, with first payments and returns beginning in 2029.

Who is subject to payment? Only individuals are subject to payment. A pass-through entity election can affect how entity income is paid and credited.

Why is this connected to retail services? ESSB 6346 links the income-tax package to tax relief, including the scheduled repeal of most ESSB 5814 retail-services taxes effective January 1, 2029, except advertising services.

What is the main legal risk to watch? The bill text and report include null-and-void language tied to a final court decision invalidating the income-tax section. Track that separately from implementation updates.

What should advisors track first? DOR implementation guidance, advisory group reports, standard deduction and credit mechanics, nonresident sourcing, pass-through election rules, and litigation status.

Sources

Not legal advice. Specific decisions still need professional review.