Many businesses add surcharges to their bills to cover expenses such as fuel costs or credit card fees. If you find an additional charge on an invoice, or your business is considering adding an additional charge to your invoices to help cover added expenses, you’ll need to know the taxability of such surcharges.

Washington’s business and occupation (B&O) and retail sales taxes apply to “gross proceeds of sales” without any deductions for costs of property sold, costs of materials used, labor costs, delivery costs, any expenses paid, etc. (RCW 82.04.070).

In cases where the surcharge is added to an invoice to recover other costs incurred by the seller, the surcharge is subject to the same tax that applies to the billing.

For example:

  • If a surcharge (including a "Living Wage" surcharge to offset the cost of having to pay their workers a higher minimum wage) is placed on a restaurant bill, it is subject to retail sales tax and retailing B&O tax.
  • If a surcharge is added to a bill for attorney fees, the surcharge would be subject to the B&O tax under service and other activities classification.
  • If a surcharge is added to a bill from a moving company for hauling property from one point to another point in this state, the surcharge would be taxable under the appropriate classification of the public utility tax.

More information:

Surcharge guidelines (pdf) (

Gratuities (Tips)

Cost Reimbursements