Washington State 2025 Tax Legislation Updates: General Taxes (Sales, Use, and Excise)

Washington's 2025 legislative session brought significant tax changes impacting everyday consumers, small businesses, and local governments. From sales tax increases to excise taxes on digital services and luxury items, these changes are reshaping how Washington collects and manages revenue. At the Law Office of Theresa Nguyen, PLLC, we’re here to help you understand what these updates mean and how to stay compliant.

💰 Key Changes to Sales, Use, and Excise Taxes

🚒 Local Sales Tax for Public Safety

Effective July 27, 2025

• Local governments may now impose an additional 0.1% sales and use tax to fund public safety programs.

• Funds may be used for police, fire, emergency services, and related programs.

⚠️ If you live or operate a business in a jurisdiction that adopts this new tax, expect a slight increase in your total sales tax rate.

👜 Reusable Bag Fee Update

Effective July 27, 2025

• Modifies the way retailers collect and manage fees for reusable plastic carryout bags.

• Retailers must ensure point-of-sale systems reflect updated fee requirements and reporting.

📅 Review your compliance procedures to avoid penalties.

🏠 Real Estate Excise Tax (REET) Exemption for Community Purpose

Effective January 1, 2026

• Creates a REET exemption for qualified transfers of property in affordable housing developments to nonprofits or public agencies for community purposes.

🏥 Nonprofits and developers should prepare to document eligibility and maintain exemption qualifications.

⛽ Transportation-Related Taxes and Fees

Various Effective Dates

The 2025 transportation package includes broad updates that will affect vehicle purchases, rentals, and peer-to-peer sharing:

• Luxury Vehicle Tax: An 8% luxury tax on vehicles sold for over $100,000.

• Luxury Aircraft Tax: A 10% tax on private aircraft sales over $500,000.

• Recreational Vessel Tax: New tax on high-value boat sales.

• Motor Vehicle Sales/Use Tax Increase: A higher tax rate on all vehicle purchases.

• Rental Car Tax Increase: Adjusted tax rate on vehicle rentals.

• Tire Fee Increase: Increased disposal fee for each new tire sold.

• Peer-to-Peer Car Sharing Tax: New excise tax on car sharing platforms (e.g., Turo).

• Exemption for Zero-Emission Buses: Transit agencies and tribes can claim sales/use tax exemptions for qualifying purchases.

🚗 If you operate in transportation, rental, or automotive sectors, update your systems and educate your customers about the changes.

💡 Expanded Sales Tax on Digital and Professional Services

Effective October 1, 2025

Washington is expanding the retail sales tax base to include more digital services:

• Newly Taxable Services:

  • IT support & training

  • Custom software development

  • Advertising & marketing

  • Security services (monitoring, investigation, armored transport)

  • Temporary staffing

  • Live presentations and webinars

• Eliminated Exclusions:

  • Human effort-based digital services

  • Digital advertising

  • Data processing

🛠️ Digital, marketing, and staffing agencies must review contracts and update invoicing to include sales tax.

♻️ Excise Tax on Zero-Emission Vehicle (ZEV) Credits

Effective May 20, 2025

• New excise tax on the sale or banking of surplus ZEV credits.

• Targets large manufacturers or businesses trading environmental compliance credits.

📊 Businesses engaged in energy or transportation credits should evaluate reporting requirements and tax impacts.

⛵ Nonresident Vessel Permits

Effective September 1, 2025

• Increased permit fees for out-of-state boats operating in Washington.

• New fee tier for large vessels (201–300 feet).

✉️ Yacht and marina businesses should prepare for fee collection and educate nonresident customers.

🧠 How These Changes Affect You

Whether you’re a consumer, local business, or part of the transportation or digital services economy, these changes will likely impact your bottom line. Preparing now can help avoid costly compliance issues later.

✅ What You Should Do:

• Retailers: Review point-of-sale tax settings for bag fees and digital services.

• Auto Dealers & Lessors: Adjust disclosures for luxury and transportation-related taxes.

• Developers & Nonprofits: Track exemption eligibility for community-based real estate.

• Digital & Service Providers: Review contracts and update billing for newly taxable services.

👩‍⚖️ How We Can Help

At the Law Office of Theresa Nguyen, PLLC, we assist clients across King County and Washington State with:

• Tax law compliance and interpretation

• Real estate transfer and REET exemptions

• Sales tax audit defense and guidance

• Digital services tax compliance planning

📍 Located in Renton, WA
📞 Call today or book a consultation online to get ahead of Washington’s 2025 tax changes.

Other Articles About the Washington State 2025 Tax Legislation

Washington State 2025 Tax Legislation Updates: Estate and Gift Tax Changes

Washington State 2025 Tax Legislation Updates: What Individuals Need to Know

Washington State 2025 Tax Legislation Updates: What Business Owners Should Know