Article | by Andrea Potter

A significant change to Washington State’s tax law quietly took effect on October 1, 2025. Under ESSB 5814, a broad range of services that were previously not subject to Washington retail sales tax became taxable. Industries commonly impacted include those providing information technology services, advertising services, staffing services, custom software and website development, training, and certain security-related services. For many businesses, this change was difficult to track before it took effect, and some may have unknowingly fallen out of compliance as a result. The changes affect both businesses that may have failed to collect retail sales tax and purchasers that may have incurred use tax liabilities.

The Washington State Department of Revenue (WA DOR) recognized this, and in response has created a temporary Penalty Relief Program. Businesses that voluntarily come forward to report and pay any uncollected retail sales tax or unpaid use tax tied to ESSB 5814 may qualify to have their penalties waived entirely. The program covers reporting periods from October 1, 2025 through December 31, 2026, and applications must be submitted by September 30, 2027.

There are a few important things to understand before acting. The program waives penalties only – any underlying tax and accrued interest must still be paid. Penalties tied to evasion, negligence, or tax avoidance are not eligible. For businesses operating under preexisting contracts that qualify for temporary sales tax relief, the penalty relief period begins when that temporary contract relief expires or on April 1, 2026, whichever occurs first.

For businesses that provide services in Washington State, now is the time to review whether ESSB 5814 applies, what exposure may exist, and whether participating in this program makes sense before the window closes. While the application deadline is not until 2027, interest continues to accrue on any unpaid tax in the meantime, so earlier action generally means a lower total bill.

About Geffen Mesher: Geffen Mesher is a Portland-based CPA and advisory firm with nearly a century of experience serving businesses, families, and investors across the Pacific Northwest. We provide ongoing financial strategy, accounting, and tax advisory services for businesses and individuals across a wide range of industries. Learn more at gmco.com.

Geffen Mesher’s team is available to assist you with questions related to these updated rules. Please contact professionals for more information at INFO@GMCO.COM.