WashingtonSB 61132025-2026 Regular SessionSenateWALLET

Concerning taxes administered by the department of revenue.

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Bill Overview

Analyzed Economic Effects

30 provisions identified: 12 benefits, 9 costs, 9 mixed.

Larger estate deduction for family businesses

Qualifying estates can deduct $2.5 million for deaths from January 1, 2014, through June 30, 2025. The deduction rises to $3 million for deaths from July 1 through December 31, 2025. Starting in 2026, that amount rises with inflation, rounds to the nearest $1,000, and cannot decrease. Business interests must exceed half the Washington taxable estate, before the exclusion deduction, and be worth no more than $6 million. Family ownership and active work requirements cover the eight years before death, including at least five years of active work. The interests must pass to a qualified heir, and the deceased person must have been a U.S. citizen or resident. Disqualifying events within three years can trigger repayment through an additional tax.

More Washington Computer Science and Engineering Seats

Beginning in fiscal year 2028, Washington's four-year state universities must add funded seats in computer science and engineering programs. This requirement applies when qualified Washington applicants outnumber available seats by 100. The added seats must match the number of excess qualified applicants. Funding comes from the workforce education investment surcharge; the law does not specify individual payments or tuition cuts.

More farmland qualifies for tax treatment

Land meeting a listed agricultural category can retain farm classification with an agrivoltaic facility that combines solar power and farming. Conservation land includes previously classified farmland that no longer meets farm classification criteria. It also includes traditional farmland outside the listed land-classification programs with strong potential to return to commercial farming. That traditional farmland cannot have been permanently devoted to a use inconsistent with agriculture. These definitions affect access to the chapter's property tax treatment.

More businesses qualify for larger tax credits

More businesses qualify for a higher business and occupation tax credit maximum. The higher maximum is $160 per reporting-period month; other businesses have a $55 monthly maximum. At least half the business's taxable amount must fall in the classifications listed in the law. The credit covers the full tax due up to the maximum, then shrinks under the law's formula. The Department of Revenue must provide a table that does not charge more than the standard calculation.

Added taxes on rentals and carsharing

Retail car rentals carry an additional 11.9% tax during 2026, regardless of where the vehicle is licensed. Beginning January 1, 2027, the rate is 9.9%. Starting that same date, qualifying peer-to-peer carsharing carries an additional 9.9% tax. The carsharing tax applies only to vehicles acquired for resale using a reseller permit or approved exemption certificate. These taxes apply to the transaction's selling price and fund the Multimodal Transportation Account.

New taxes on recreational boat transactions

Beginning July 1, 2026, covered recreational boat purchases carry an additional 0.5% tax. The purchase tax applies to the selling price plus the value of a like-kind trade-in. For leases requiring periodic payments, the tax uses the boat's fair market value when the lease begins. A matching use tax applies when a consumer first uses a covered boat in Washington. These rules cover vessels subject to Washington's watercraft excise tax and fund the Multimodal Transportation Account.

Sales taxes cover more paid services

Sales tax covers listed recreation charges, including golf, bowling, fishing, swimming, skating, snow sports, and associated equipment or instruction. Real-time lectures, seminars, workshops, and courses are also taxable, whether attended online or in person. Exclusions cover specified lessons, competitions, memberships, permits, school charges, therapeutic activities, childcare, and qualifying camps. Qualifying fairs, carnivals, and festivals must last no more than 21 days, with most rides not fixed to land. Presentation exclusions also cover performances, one-on-one instruction, and specified presentations at property-tax-exempt facilities. Beginning October 1, 2025, use tax covers additional listed services used in Washington, excluding specified free and nonretail services.

Higher surcharge for giant technology businesses

Beginning January 1, 2026, the advanced-computing surcharge rises from 1.22% to 7.5% of covered business gross income. It generally covers affiliated groups with more than $25 billion in worldwide revenue in the prior calendar year. At least one group member must engage in advanced computing. The yearly group cap is $75 million, with exclusions for specified hospitals, clinics, affiliates, and telecommunications or transmission businesses. Revenue goes to the Workforce Education Investment Account.

Higher taxes for large financial institutions

Beginning October 1, 2025, the additional tax on covered financial institutions rises from 1.2% to 1.5%. It applies to covered gross income of institutions in consolidated groups with at least $1 billion in prior-year net income. The income test excludes income attributable to noncontrolling interests. Revenue goes to the state general fund; this is not a tax on household income.

Farm and timber uses face limits

Timberland classification requires at least five acres, either in one parcel or connected parcels, used mainly for commercial timber. The timberland definition removes its former 10% incidental-use cap, while allowing compatible incidental uses. A separate incidental-use rule still sets limits of 10% for classified timberland and 20% for classified farm and agricultural land. Uses must fit the land's commercial purpose. Examples include wetland preservation, farm woodlots, produce stands, gravel pits, and needed unpaved parking.

Car-Sharing Transactions Avoid Extra Vehicle Sales Tax

Beginning January 1, 2027, peer-to-peer car-sharing transactions subject to the separate car-sharing tax are exempt from the extra 0.5% vehicle sales tax. This exclusion does not remove the separate tax on the car-sharing transaction.

Underage nicotine sales face criminal penalties

Selling or giving alternative nicotine products to anyone under 21 is a gross misdemeanor. Allowing such a sale or gift is also prohibited. Separately, one specific tobacco-law section excludes alternative nicotine products and cigars weighing more than three pounds per 1,000 units. That limited definition does not remove the under-21 prohibition.

Existing sales taxes help fund transportation

Beginning July 1, 2027, Washington directs part of state sales and use tax collections to the Multimodal Transportation Account. The sales-tax deposit equals 0.1% of each retail sale's selling price. The use-tax deposit equals 0.1% of the value taxed under the specified state use-tax provision. These deposits redirect existing collections; they do not add a new tax rate or provide household payments.

Free provider messaging avoids digital classification

An incidental digital communication feature is excluded from the digital automated service definition. The buyer must use it only to communicate with the provider and pay nothing for that use. The underlying service's income must fall under a business tax classification other than retailing.

More service sales qualify as wholesale

The wholesale-sale definition includes additional listed services and activities that are not retail sales. It also covers specified services sold for resale. Businesses must use the applicable wholesale classification for covered transactions rather than treating them as retail sales.

Public agencies receive targeted tax exclusions

Services between public agencies are excluded from retail sales when provided under an interlocal agreement. The public-utility property transfer exemption also includes digital goods and products sold through digital codes. That exemption requires transferring all operating property, or a complete operating section, to Washington or a Washington local government. The transferred property must be used in a public service business.

Tax exclusions for hospital staffing services

Qualifying short-term staffing at licensed hospitals is excluded from taxable retail sales when it supplements staff or fills vacancies. The law also excludes paymaster services from the temporary-staffing definition to the extent their receipts qualify for the specified deduction. These are limited exclusions, not a tax break for all staffing services.

Tax relief for internal business services

Specified sales between legally affiliated companies are excluded from retail sales. Covered services include custom software, software customization, data processing, and specified digital services involving human work after a request. Both the companies and the services must fall within the listed legal definitions. Separately, businesses do not owe use tax on otherwise taxable services their own employees perform as part of their jobs.

Digital purchases follow sales tax rules

References to property in Washington sales and use tax law include digital goods and products sold through digital codes. This extends property-based tax rules to covered digital purchases. Exceptions remain when the context clearly means physical or real property, or the broader reading produces an unreasonable result.

Sales tax covers listed investigation services

Taxable investigation services include detective work, personal background checks, fingerprinting, bounty hunting, and lie detection. Missing-person tracing and skip tracing are also included. Locksmith services are excluded from this investigation and security service list.

Grant recipients face taxes on purchases

Recipients of the law's specified tax-exempt or deductible grants make taxable retail purchases even when using grant money. Covered purchases include goods, construction or improvements, land clearing, earth moving, demolition, building relocation, and landscaping services. Another legal exclusion can still remove a transaction from retail sales.

Related companies lose service tax exclusions

Related companies lose affiliation-based retail-sale exclusions for information technology, custom website development, investigation, security, and advertising services. The change also covers specified services sold with digital goods. Being in the same company group no longer excludes these transactions from retail sales.

Tire sellers follow revised remittance rules

Buyers continue paying $5 for each newly manufactured replacement vehicle tire sold at retail; retreaded tires are excluded. Sellers remit collected fees after keeping the amount authorized by the referenced state law. That reference replaces the former 10% retention reference. The stated buyer fee does not change.

Client businesses handle covered employee sales

The law revises retailer status for professional employer organizations and their client businesses. For listed employee sales that remain excluded from the organization's retailer status, the client business is the retailer. The client must collect and remit use tax on those covered sales. This reallocates collection duties without setting a new tax rate.

Custom software tax statute is repealed

The law repeals a statute addressing custom software creation, distribution, and customization of prewritten software. That statute governed treatment of these activities as taxable services. The supplied provision does not identify replacement treatment or establish whether a particular business pays more or less.

Large buyers use direct tax payments

Direct-pay permits let eligible large buyers pay taxes to the Department of Revenue instead of having vendors collect them. Eligibility requires expected yearly tax liability of at least $240,000 or more than $10 million in taxable yearly purchases. Buyers take on direct remittance and audit duties, and permits can be revoked. The law also updates statutory references identifying transactions excluded from permit use; the supplied provision does not describe those referenced activities.

New tax duties for sharing platforms

Qualifying home-lodging and carsharing marketplaces now fall under marketplace-facilitator tax duties rather than the former exclusions. Beginning January 1, 2027, carsharing programs must get each owner's electronic certification before listing a vehicle. Owners must state whether they acquired the vehicle for resale using a reseller permit or approved exemption certificate. Programs must keep these records for at least five years. Good-faith reliance protects programs from taxes, penalties, fees, or other sanctions imposed on owners based on their certifications.

Older service contracts get tax choices

Businesses with qualifying older service contracts get a tax-classification choice for receipts from October 1, 2025, through March 31, 2026. Contracts must have been signed and executed before October 1, 2025, continued afterward, and remained unchanged during that period. The choice covers services becoming retail sales under the law's listed categories. Businesses can elect retailing or the listed service business-tax treatment; without an election, retailing treatment applies. Amounts receiving the specified retailing treatment also face sales tax, and the transition section expires July 1, 2031.

Revised sales taxes on advertising services

The law revises taxable advertising services, including digital and nondigital services. Exclusions cover specified out-of-home advertising, web hosting, domain registration, and certain media services. Direct mail does not receive the out-of-home advertising exclusion. Businesses lacking information to assign advertising services to a local tax location must assign them statewide under Department of Revenue rules.

Shared advertising gets direct tax reporting

Organizations buying advertising used inside and outside Washington can give sellers a multiple-points-of-use exemption certificate. They must report and pay applicable state and local use taxes directly; personal purchases do not qualify. Organizations can divide taxable use based on where people view or interact with advertisements. They must keep ordinary business records supporting that division. After due diligence, when locations remain unknown, the Department of Revenue can approve or require another method, including internet statistics and population.

Sponsors & Cosponsors

Sponsor

Noel Frame
Democratic • Senate

Cosponsors

June Robinson
Democratic • Senate
Rebecca Saldaña
Democratic • Senate

Roll Call Votes

All Roll Calls

Yes: 181 • No: 11

Senate vote • 3/10/2026

Final Passage as Amended by the House

Yes: 44 • No: 4 • Other: 1

House vote • 3/6/2026