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Do Washington businesses have to charge sales tax on digital advertising?
Generally, yes, when the service is within the law’s definition of advertising services and no exclusion or exemption applies. ESSB 5814 made covered advertising services subject to Washington retail sales tax and retailing business and occupation (B&O) tax starting October 1, 2025. The Department of Revenue’s advertising-services guidance sets out the current rule.
The tax treatment turns on the service being sold, not just whether an advertisement appears online. The law reaches a range of creative, planning, placement, referral, and campaign-related work, including services performed through digital channels.
Which advertising services are taxable in Washington?
The Department describes covered services as those related to the creation, preparation, production, or dissemination of advertisements. Examples in its interim guidance include:
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- Layout, art direction, graphic design, production supervision, and other creative production work.
- Advertising placement, referrals, and acquiring advertising space.
- Advice about advertising methods and web campaign planning.
- Online referrals, search marketing, and lead-generation optimization.
- Monitoring website traffic when it is used to evaluate an advertising campaign.
These examples are not a blanket rule for every contract bearing an advertising label. The actual work, transaction terms, customer location, and any applicable exclusion or resale treatment matter. The Department cautions that its examples are general guides based on particular facts.
Are billboards, print ads, or direct mail covered?
Not every physical advertisement is excluded, and not every digital service is treated identically. Washington lists specific exclusions rather than drawing a simple online-versus-offline line.
| Service or medium | Treatment described by Washington DOR |
|---|---|
| Billboards and other listed out-of-home advertising | Excluded categories include billboards, transit advertising, street furniture, place-based advertising, live-event signage, naming rights, and fixed signage. |
| Newspapers, printing, publishing, and specified radio or television broadcasting | Services related to these specified activities are excluded. |
| Web hosting and domain registration | Excluded. |
| Direct mail | Direct mail is not included in the statutory out-of-home exclusion list. Its treatment depends on the service provided and the applicable rules; do not assume it is excluded merely because it is a physical format. |
| Other print or physical advertising work | The treatment depends on the exact service and whether a specific exclusion applies; the law does not establish a general exclusion for all physical ads. |
For a particular campaign, agencies should identify the work performed and compare it with the exclusions in the Department’s current advertising-services page and September 17, 2025 interim guidance.
How should an agency determine and report the tax?
The Department’s guidance addresses sourcing, resale, exemptions, and documentation. An agency should not decide taxability solely from the ad’s medium or the client’s billing address; it should review the particular service and apply the Department’s sourcing and documentation rules to the transaction.
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- Classify the work. Describe what the agency actually performs—such as creative production, campaign planning, placement, hosting, or a combination—rather than relying only on a broad invoice label.
- Check the exclusions. Compare each service with the specified publishing, broadcasting, web-hosting, domain-registration, and out-of-home exclusions.
- Determine sourcing and any resale treatment. Apply the Department’s current rules to where the customer receives the service and whether it is sold for resale. Keep appropriate resale or exemption documentation when applicable.
- Collect, report, and remit as directed. For taxable sales, follow current Department guidance while the court proceedings remain unresolved.
Because service bundles can combine taxable work with excluded activities, agencies should preserve enough contract, invoice, and work-scope detail to support how each charge was treated. For unusual or material transactions, consult the Department’s guidance or a Washington tax professional.
Has the legal challenge been decided?
No. As of October 7, 2026, the Department says plaintiffs argue that the amended definition, as applied to certain advertising services, violates the federal Internet Tax Freedom Act. It also says courts have not decided those questions. The Department’s overview of newly taxable services likewise directs affected taxpayers to follow current guidance during ongoing proceedings.
The official Department pages reviewed do not provide the case names, docket numbers, next hearing date, or a current procedural timetable. The legal challenge is therefore unresolved; neither a favorable ruling for the plaintiffs nor a final decision upholding the law should be inferred from the fact that litigation is pending.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Why have agencies criticized the law?
In a May 28, 2025 report, GeekWire described agency owners’ concerns about higher client costs, compliance burdens, and the possibility that clients might shift work to out-of-state providers. Curtis Costner, president of Sands Costner, said, “It makes it harder for local businesses to work with other local businesses.” GreenRubino partner John Rubino said, “It’s unfair and it seems unreasonable. It’s unbelievable.” These are reported concerns, not measured evidence that businesses have moved work or that the tax has produced a particular economic effect.
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1Scan for outdated or missing drivers - takes under a minute2Repair Windows errors before they cause bigger problems3Fix the driver behind crashes, sound loss and screen glitchesCritics also questioned why digital advertising could be taxed while specified media and out-of-home categories are excluded. Supporters presented the law as modernization for an economy with more activity conducted through computers and technology. In Senate floor debate, co-sponsor Sen. Noel Frame (D-Seattle) said, “As more and more of our economy happens with computers and technology, this bill is doing the work to modernize the tax code to match.” The arguments reflect a disagreement over tax-code neutrality and the practical distinction between service categories; they do not change the current collection instructions.
What agencies should do while the case is pending
The Department’s current direction is to collect and remit tax on sales subject to the law. Agencies should use the Department’s live advertising-services page for current requirements, retain transaction records supporting their treatment, and review later Department notices or court decisions for changes. The broader service-tax rules have also had later exclusions and exemptions effective July 1, 2026, so rules for other service categories should be checked separately rather than assumed to match advertising services.
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