Sales tax now applies to some services

Starting October 1: Some business services are now subject to retail sales tax, as required by state law, ESSB 5814. When you buy these services, vendors should add sales tax to your bill. If you sell these services, you should begin collecting retail sales tax. Learn more about Services newly subject to retail sales tax.

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Surcharge on high grossing businesses

Issue Date

Intended audience: Businesses with Washington taxable income greater than $250,000,000 in a calendar year.

Beginning Jan. 1, 2026, businesses with Washington taxable income of $250,000,000 or more in a calendar year are subject to a surcharge in addition to the business and occupation (B&O) tax. The rate is 0.5% of certain Washington taxable income over $250,000,000.

This surcharge expires December 31, 2029.

Exempt business activities

The following amounts are exempt from the surcharge and excluded from the calculation of income subject to the surcharge:

  • Income subject to the financial institution surcharge.
  • Income subject to any manufacturing B&O tax classification, including wholesale and retail sales of these products by a person subject to that manufacturing B&O tax classification.
  • Retail sales of exempt food and food ingredients, including food purchased under the supplemental nutrition assistance program (SNAP).
  • Retail sales of prescription drugs.
  • Income subject to the preferential tax rates for timber or wood products.
  • Income from the wholesale or retail sale of petroleum products owned by a person not located in Washington and processed for hire in Washington by an affiliated entity.
  • Income for which the multiple activities credit (MATC) is allowed.
  • Income earned by persons engaged in business primarily as a farmer or eligible apiarist as defined under RCW 82.04.213.
  • Income earned by persons subject to the workforce education surcharge.
  • Income from the wholesale or retail sale of motor vehicle or special fuel.

How do I report the surcharge?

You will report the surcharge on your excise tax return using the Taxable Income Over $250 Million per Year Surcharge B&O tax classification.

Note: If you believe you are subject to the surcharge, you may use the Add/Delete feature when filing to add this classification to your excise tax return. If you do not see this classification, please call us at 360-705-6705.

More information

RCW 82.04.288 Surcharge on Washington taxable income over $250,000,000-Exemptions
Engrossed Substitute House Bill (ESHB) 2081, (Sec. 201); Chapter 420, Laws of 2025.

Questions?

Please call 360-705-6705 or you may request a ruling.