Washington D.C. Just Delayed Its 7% Sales Tax Again. The Rate Is Still 6%.

Washington D.C.'s sales tax is not 7%. It is 6%.

If you updated your systems for a D.C. rate change on October 1, 2026, set your rate back to 6%. The D.C. Office of Tax and Revenue (OTR) posted a notice that the October 2026 Sales and Use Tax increase has been postponed to October 1, 2027. The general sales tax rate remains 6% through September 30, 2027. dcdc

That notice did not get much attention. Many compliance guides, including several from major tax platforms, still showed 7% as the October 1, 2026 rate right up to the deadline. Some guides also list the current rate as 6.5%. That figure is wrong, and we published it ourselves. Businesses that followed those guides without checking OTR may now be over-collecting from D.C. buyers.

Here is what happened and what to do about it.

How D.C. Got Here: A Timeline of Rate Changes

D.C.'s general sales tax rate is 6%, and the planned increase to 7% has moved twice.

The 2024 plan: The Sales and Use Tax Amendment Act of 2024 scheduled a rate of 6.5% for periods beginning October 1, 2025 through September 30, 2026, and 7% for periods beginning October 1, 2026. dc

The first delay: In 2025, D.C. removed the 6.5% step. OTR's October 2025 notice said the general rate would remain 6.0% through September 30, 2026 and increase to 7.0% for periods beginning on and after October 1, 2026. dc

The second delay: The Council approved legislation delaying the increase until October 1, 2027. OTR now reports that the general rate remains 6% through September 30, 2027. wjla

The result: D.C.'s general rate is 6%. It did not change on October 1, 2026.

What D.C. Is Considering Instead

The delay does not mean D.C. has stopped looking for revenue. As of September 23, WJLA reported that lawmakers were weighing several proposals. They include a new tax on certain high-end homes that are not someone's primary residence, a higher tax on investment income for some high-income residents, and an increase in the sales tax. One investment income proposal is a 3% surcharge for taxpayers earning more than $400,000, or married couples earning more than $500,000. wjla

WJLA reports that these proposals are separate from the already-delayed sales tax increase. The Council is expected to hold a major hearing on the revenue measures on October 16. wjla

What Businesses Need to Do Right Now

If you sell into D.C., check these items this week:

Set your D.C. general rate to 6%. This applies whether your system moved to 7% or 6.5%.

Review your transactions since the change. If your system applied 7%, you over-collected one percentage point on each taxable D.C. sale. If it applied 6.5% at any point, you over-collected half a point. Identify every affected transaction and calculate the total.

Decide how to handle the over-collection. Consider refunding buyers when the amount is material. Talk with your tax advisor about how to treat over-collected tax, since the right approach depends on your situation.

Check your tax software. Some platforms updated to 7% automatically. Confirm that your D.C. setting now shows 6%.

Set a reminder for September 2027. October 1, 2027 is the new target date for 7%, and further changes are possible. Verify the date before you update your systems.

The Broader D.C. Tax Picture

The sales tax delay is not the only D.C. tax story this fall. WJLA reports that D.C.'s unemployment rate was 5.7% in August and that the District faces ongoing budget pressures involving education, health care, and other city services. Those pressures drive the revenue debate described above.

For businesses with D.C. sales, particularly in retail, hospitality, SaaS, and digital services, the October 16 hearing is worth watching.

A correction: Our earlier coverage of D.C.'s rate described the current rate as 6.5% and said the increase would take effect October 1, 2026. The 6.5% figure was wrong, and the Council has since delayed the increase. We have updated that article.

Not sure your D.C. configuration reflects the 6% rate, or concerned about over-collection since your last change? Book a free consultation with our team at sales.tax. We will verify your D.C. rate setup and help you address any over-collection.

Washington D.C.'s Sales Tax Is Going to 7% on October 1. Here's What Every Business Selling Into the District Needs to Know.

UPDATE — October 1, 2026: The D.C. Council approved legislation delaying this rate increase to October 1, 2027. Washington D.C.'s general sales tax rate remains 6.5% through September 30, 2027. The article below reflects information available at time of publication. Read our updated coverage here." Then link to the new article you just wrote

Washington D.C. is raising its sales tax again.

The general sales tax rate on the gross receipts from the sale of or charges for tangible personal property, digital goods, and taxable services will increase to 7.0% for periods beginning on and after October 1, 2026. Mass.gov

This is not a surprise. It's the second step of a planned two-year increase that the D.C. Council approved in 2024. The rate went from 6% to 6.5% on October 1, 2025, and it goes from 6.5% to 7% on October 1, 2026. Hands Off Sales Tax

The first increase already happened. The second one is 107 days away.

If you sell anything into Washington D.C. — physical goods, software, digital content, taxable services — your rate is going up in October. Here's everything you need to know before that happens.

What the Rate Increase Covers

D.C.'s general sales tax rate is one of the broadest in the country. Unlike most states, which have long lists of exemptions and special categories, D.C. applies its general rate to an unusually wide range of goods and services.

The rate applies to the gross receipts from the sale of or charges for tangible personal property, digital goods, and taxable services. Mass.gov

In practical terms, that covers:

Certain categories such as restaurant meals, hotel stays, and parking are taxed at higher special rates — those don't change with the general rate increase. Numeral

The items that remain exempt — unprepared food, prescription drugs, medical devices, and sales to qualifying exempt organizations — stay exempt regardless of the rate change.

Why D.C. Went to 7% in Two Steps

The story behind this rate increase is worth understanding — because it explains why the October 1 date is firm and why no further delay is expected.

D.C.'s Budget Support Act of 2024 originally scheduled the rate increase in a single jump from 6% to 7% on October 1, 2025. But the D.C. Council later passed the Sales Tax Increase Delay Amendment Act of 2025 — which split the increase into two steps and pushed the full 7% rate back by one year.

The general sales tax rate remained 6.0% through September 30, 2026 — then increases to 7.0% for periods beginning on and after October 1, 2026. Madrasaccountancy

The delay was a one-time concession to give businesses more time to prepare. There is no further delay legislation pending. October 1 is the date.

What D.C.'s Tax Structure Looks Like After October 1

One of D.C.'s compliance advantages — and it has few of them — is its simplicity.

Washington D.C. applies a uniform rate with no additional county, city, or special district taxes. This means businesses charge the same rate regardless of where the customer is located within the district. Because there are no local taxes, Washington D.C. is one of the simplest jurisdictions for sales tax compliance — you do not need to calculate multiple local rates or manage layered jurisdiction rules. Avalara

After October 1, the complete D.C. rate picture looks like this:

The general rate increase affects the first category only — the others are set by separate legislation and remain unchanged.

SaaS and Digital Businesses: You're Fully Taxable in D.C.

This is the detail that catches the most out-of-state sellers off guard — especially software companies and digital product businesses.

The District of Columbia treats SaaS, digital goods, and cloud software as taxable services. SaaS — both B2B and B2C — is taxed at the standard rate. Digital downloads and media, including e-books, streaming, and apps, are also taxable. Sales Tax Calculator

Official D.C. Office of Tax and Revenue guidance confirms that digital applications and software — whether canned, prepackaged, or customized — are taxable as data processing services. Sales Tax Calculator

That means if you sell a SaaS subscription to a D.C.-based business or consumer, you're collecting 6.5% right now and you'll be collecting 7% starting October 1. The fact that your customer is a business — not a consumer — doesn't change anything. D.C. taxes B2B SaaS the same as B2C SaaS.

If you've been assuming your software sales into D.C. aren't taxable — or that B2B transactions are exempt — that assumption is wrong and likely has been for years.

Economic Nexus in D.C. — The Threshold That Catches Remote Sellers

Before you can worry about collecting the right rate, you need to know whether you have an obligation to collect at all.

If you have physical nexus in Washington D.C., or establish economic nexus by having $100,000 or more in gross sales or 200 or more transactions with D.C. residents, you must register and collect the correct tax. Mass.gov

The $100,000 or 200-transaction threshold is the same dual-trigger structure that most states use — and both triggers are still in place in D.C. unlike states like Illinois that have eliminated the transaction threshold. Cross either one and you have a collection obligation.

For remote sellers of SaaS, digital goods, or taxable services — this is where exposure quietly accumulates. A software company selling subscriptions to D.C.-based businesses may cross the $100,000 threshold without ever tracking it, assume their sales are exempt because they're B2B, and end up with years of uncollected sales tax on the books.

The October 1 rate increase is a good trigger to audit whether you have D.C. nexus and whether you've been collecting correctly.

What Marketplace Sellers Need to Know

If you sell through certain online platforms — including Amazon, eBay, or Etsy but not Shopify — those platforms are considered marketplace facilitators. Washington D.C. law requires marketplace facilitators to collect and remit tax on your behalf. Mass.gov

But not every platform qualifies as a marketplace facilitator under D.C.'s rules. If you sell through a platform that doesn't meet the definition — or through your own website alongside a qualifying platform — your direct sales are your own compliance obligation.

The October 1 rate change will be handled automatically by qualifying marketplace facilitators for transactions they process. But your direct sales, your own website transactions, and any platform that doesn't qualify as a facilitator under D.C. rules — those are your responsibility to update.

The Hotel Surtax — A Separate Change Worth Knowing

The general rate increase isn't the only D.C. tax change relevant to businesses in 2026.

The Hotel Surtax Amendment Act of 2025 extended the temporary increase in the sales and use tax rate on hotel rooms, lodgings, and accommodations from 14.95% to 15.95% through September 30, 2027. Madrasaccountancy

That means hotels, short-term rental operators, and accommodation platforms serving D.C. customers are operating under a 15.95% rate — not the standard general rate — through at least September 2027. The rate was initially increased in 2022 and has now been extended twice.

If you operate lodging in D.C. or book accommodations for clients in D.C., the 15.95% rate applies regardless of what happens to the general rate in October.

What Businesses Need to Do Before October 1

The October 1 effective date is 107 days away. That sounds like plenty of time — but given how the compliance work actually flows, starting now is the right call.

1. Confirm your D.C. registration status. If you sell taxable goods or services into D.C. and meet the nexus threshold, verify you're registered with the D.C. Office of Tax and Revenue through MyTax.DC.gov. If you're not registered and should be, this is the time to fix it — before the rate change adds a new layer of liability on top of existing exposure.

2. Audit your product and service taxability. D.C.'s taxable service list is broad and includes categories that many sellers assume are exempt. Review every product and service you sell into D.C. against the OTR's taxable and non-taxable services list. Pay particular attention to SaaS, digital goods, data processing services, and bundled offerings.

3. Contact your tax software vendor. Ask your vendor specifically when they will push the updated D.C. rate for October 1. Most major platforms update automatically — but verify rather than assume, and get a timeline in writing.

4. Update any manually managed rate tables. If you manage D.C. rates in a spreadsheet, accounting system, or custom billing platform, schedule the rate update for October 1 now — not September 30 at midnight.

5. Review your filing schedule. D.C. sales tax returns are due by the 20th of the following month — filed and remitted through MyTax.DC.gov. Your October returns — covering October 1-31 at the new 7% rate — will be due November 20. Make sure your systems are capturing the rate correctly from the first day of October. Mass.gov

6. Consider a historical compliance review. If you sell SaaS or digital goods to D.C. customers and haven't been collecting sales tax, the October rate change is a natural moment to address that exposure. Voluntary disclosure with the D.C. OTR typically results in a limited lookback period and reduced or eliminated penalties — far less costly than a future audit.

The Bigger Picture: D.C. at 7% Is a National Trend in Miniature

Washington D.C. moving to 7% on tangible goods, digital products, and SaaS is a microcosm of what's happening across the country.

States and jurisdictions are expanding what they tax and raising the rates they charge. Digital goods that were tax-free a decade ago are now taxable in most jurisdictions. SaaS that was in a gray area five years ago now has clear guidance in most states — and it's almost always taxable. Services that were exclusively B2B and assumed to be exempt are increasingly being pulled into the taxable column.

D.C.'s trajectory — 6% to 6.5% to 7% over two years, with a broad taxable base that already includes digital goods and SaaS — is where a growing number of states are heading. The compliance lesson is the same everywhere: the rate you're collecting today may not be the rate you're required to collect in October. And the products you're treating as exempt may not be exempt where your customers are located.

Selling into Washington D.C. and want to make sure your rate is updating correctly on October 1 — or concerned you may have historical SaaS or digital goods exposure that needs to be addressed before the new rate kicks in? Book a free consultation with our team at sales.tax. We'll review your D.C. compliance setup, confirm your registration status, and help you get ahead of October 1 before it becomes a problem.

Washington Is Forgiving Penalties on Its Digital Ads Tax. But You Have to Come Forward First.

Washington state did something unusual this spring.

It admitted that one of its own tax laws was too confusing for businesses to comply with — and then offered to forgive the penalties for anyone who comes forward to pay what they owe.

Washington's Department of Revenue is temporarily waiving financial penalties for taxpayers struggling to comply with the state's new tax on digital advertising and other technology services, acknowledging the transition has been "challenging for many businesses."

The window is open. But it won't stay open forever.

Application deadline: September 30, 2027.

If you've been selling digital ads, IT services, custom software, or similar services to Washington customers since October 2025 and haven't been collecting sales tax — you likely owe back tax. And this program is your best path to resolving it without the penalty on top.

What Changed in October 2025

The story starts with a law most digital businesses never saw coming.

Effective October 1, 2025, Washington's Engrossed Senate Substitute Bill 5814 expanded the state's retail sales tax to a broad range of services that had never been taxable before.

If any of the following apply to your business, this penalty relief program is worth a close look: you sell services that became taxable under ESSB 5814 — including digital advertising, IT support, custom software, website development, staffing, security, or live presentations in Washington. These categories have been subject to retail sales tax since October 1, 2025. Madrasaccountancy

To put that in plain terms: if you run a digital marketing agency, sell advertising placements, develop custom software, provide IT support, place temporary staff, or run live presentations or online seminars — and any of your customers are in Washington — your services became taxable eight months ago.

The law took effect October 1, 2025, but transitional rules applied to certain preexisting contracts through March 31, 2026. Starting April 1, 2026, unaltered qualifying contracts are subject to Washington's retail sales tax and retailing B&O tax. TaxCloud

And it happened fast. The Department of Revenue issued interim guidance for security services on September 12 — just 19 days before the October 1 effective date. Many businesses never got the memo at all.

Why Washington Is Offering Penalty Relief

Washington didn't create this program out of generosity. It created it because the law created genuine confusion — and the state would rather collect the tax than spend years fighting businesses that had legitimate reasons not to know they owed it.

Washington acknowledged the transition has been "challenging for many businesses." Sales Tax Calculator

That's an understatement. The services covered by ESSB 5814 span an enormous range of industries — digital advertising, IT support, custom software, website development, staffing, security services, live seminars and workshops. Many of these categories had never been subject to Washington retail sales tax. Many sellers — especially those outside Washington selling remotely to Washington customers — had no idea the law existed.

The Tax Foundation described Washington's digital ad sales tax as "a legal and economic minefield." A security services firm filed a constitutional challenge to the law's effective date, arguing businesses weren't given adequate time to prepare — before ultimately dropping the case. TaxCloud

The penalty relief program is Washington's acknowledgment that it moved fast, communicated late, and left a lot of businesses scrambling. The offer: come forward, pay the tax and interest you owe, and the penalties go away.

What the Program Actually Covers

The terms of the relief program are specific. Understanding exactly what's covered — and what isn't — determines whether it makes sense for your business.

What's covered: The program covers uncollected retail sales tax and unpaid use tax for the new categories of taxable services created by ESSB 5814. Eligible reporting periods run from October 1, 2025 through December 31, 2026.

What's waived: Penalties only. The program waives penalties only. The underlying tax and all accrued interest remain due.

What's not waived: Evasion, negligence, and tax avoidance penalties are not eligible for relief via this program. If you knew about the tax and deliberately didn't collect it, this program doesn't protect you.

The application deadline: Applications must be submitted via the DOR's Voluntary Disclosure Application system on or before September 30, 2027. Applications are reviewed in the order received.

The agreement process: Once the DOR determines a taxpayer qualifies, it will issue a Penalty Relief Agreement that the taxpayer must sign and return within 30 days. After execution, the DOR will work with the taxpayer to determine the appropriate tax liability and issue a formal assessment.

How Washington's Penalties Work — And Why Waiving Them Matters

To understand the value of this program, you need to understand what Washington's penalties look like without it.

Late filing and payment penalties in Washington are: 9% after the due date, 19% after the last day of the month following the due date, and up to 29% after the last day of the second month following the due date. Avalara

That's a penalty that compounds quickly. On a $50,000 back-tax liability, a 29% penalty adds $14,500 on top — before interest. For businesses with larger Washington revenue streams, the numbers scale fast.

The penalty relief program eliminates that layer entirely. You still owe the tax. You still owe the interest. But the 9% to 29% penalty stack goes away if you apply and qualify.

Who Is Most at Risk

The categories of businesses most likely to have unresolved exposure under ESSB 5814 are specific — and they're common.

Digital advertising agencies and platforms. If you sell display advertising, search engine marketing, social media advertising, programmatic ad placements, or lead generation services and have Washington clients — you've had a sales tax obligation since October 1, 2025.

IT service providers. Managed service providers, helpdesk services, network support, cybersecurity firms, and similar businesses serving Washington customers are covered.

Custom software developers. If you build custom software or customize prewritten software for Washington clients, that's taxable. Off-the-shelf software was already taxable in Washington — custom development is now too.

Website developers. Custom website design, development, and support services are explicitly covered under ESSB 5814.

Staffing agencies. Temporary staffing services into Washington are taxable under the new law.

Seminar and training providers. Live presentations, including lectures, seminars, workshops, or courses where participants attend either in person or via telecommunications in real time, are taxable — with some carveouts being added in late 2025 and 2026 for certain in-person-only presentations. Quicktaxcalc

Remote sellers. Remote sellers with Washington buyers purchasing covered services are on the hook for use tax even if they didn't collect it at the point of sale. This isn't just a Washington-business problem. If you're in California, Texas, New York, or anywhere else and have Washington clients buying your covered services — you have exposure. Madrasaccountancy

The Preexisting Contract Wrinkle

There's one more layer that caught many businesses off guard.

When ESSB 5814 passed, Washington included a transitional rule for businesses with existing contracts: those preexisting contracts were temporarily exempt from the new sales tax through March 31, 2026 — giving businesses time to renegotiate or restructure agreements.

Starting April 1, 2026, unaltered qualifying contracts are subject to Washington's retail sales tax and retailing B&O tax. However, if a qualifying existing contract was altered after October 1, 2025, it became subject to the retail sales tax and retailing B&O tax when the contract was altered.

What counts as "altering" a contract? Adding, removing, or exchanging the parties subject to the contract — among other substantive changes. Businesses that modified existing agreements for any reason after October 1, 2025 may have triggered taxability earlier than they realized — and the penalty relief program covers that exposure too. TaxCloud

What to Do Right Now

If your business falls into any of the categories covered by ESSB 5814, here's the action plan:

1. Determine your Washington revenue from covered services since October 1, 2025. Pull your billing records for Washington clients in covered service categories. Calculate the total taxable revenue for the period October 2025 through December 2026.

2. Calculate the tax owed. Washington's retail sales tax rate varies by jurisdiction — base rate plus applicable local rates. Use the DOR's rate lookup tool for each customer's location.

3. Assess whether you're registered. Unregistered businesses should review eligibility under the separate Voluntary Disclosure Program before applying for penalty relief under this program. If you've never registered with Washington's Department of Revenue, the penalty relief program has a sister program specifically for you.

4. Submit your application. Applications go through the DOR's Voluntary Disclosure Application system. The process results in a Penalty Relief Agreement, a draft assessment for your review, and a final invoice. Information submitted as part of the application and any executed Penalty Relief Agreement is treated as confidential in accordance with Washington law. Tax Foundation

5. Pay what's owed. A final invoice is posted to the applicant's My DOR account. Full payment is due by the date listed on the invoice. Additional interest and late penalties may accrue if payment is not made by that date. Tax Foundation

6. Update your going-forward compliance. Register for Washington retail sales tax, configure your billing system to collect the correct rate on covered services, and start remitting on your regular filing schedule. The penalty relief program covers the past — but it doesn't automatically fix the future.

The Deadline Is 16 Months Away — But Don't Wait

September 30, 2027 sounds like a long time. It isn't — not if you're calculating back-tax liability across 15 months of transactions, registering with the DOR, and going through the formal agreement process.

More importantly, the penalty relief program doesn't protect you from audit. Washington's enforcement systems are running. If the DOR identifies your business through its data matching systems before you apply, the window to resolve this on favorable terms closes.

The businesses that benefit most from voluntary disclosure programs are the ones that come forward early — before the state comes to them.

Selling digital advertising, IT services, custom software, or related services to Washington customers — and not sure whether you have back-tax exposure under ESSB 5814? Book a free consultation with our team at sales.tax. We'll review your Washington revenue, calculate your potential liability, and help you navigate the penalty relief program before the state finds you first.

Washington Just Started Taxing Self-Storage Units. The First Deadline Is July 25.

If you own or operate a self-storage facility in Washington state, you have a tax obligation that didn't exist three months ago.

Starting April 1, 2026, income from the rental or lease of storage space at self-service storage facilities is subject to Washington's Business and Occupation (B&O) tax under the Service and Other Activities classification.

The first quarterly payment deadline for self-storage facilities is July 25, 2026. Fox 59

That's 64 days away. And many operators are still running their businesses the same way they always have — unaware that a new tax obligation has been quietly accruing since April 1.

Why This Came Out of Nowhere

For decades, self-storage rental income in Washington was treated the same as any other real estate rental.

Prior to April 1, 2026, the rental income derived from self-storage facilities was considered rental of real estate and therefore not subject to B&O tax. That meant self-storage operators sat entirely outside Washington's B&O tax system — no filing, no remittance, no compliance burden on the rental income side. Fonoa

That changed with the passage of Engrossed Senate Substitute Bill 5794. The new law specifically changed this treatment by adding the business of renting or leasing individual storage space at self-service storage facilities to the class of business activity that must pay B&O tax. Fonoa

In passing ESSB 5794, the Legislature cited its interest in having a balanced tax system and modified existing exemptions in furtherance of its public policy interests. Fox 59

Translation: the exemption that protected self-storage income from B&O tax was eliminated. The Legislature decided storage facilities should be taxed like other service businesses — not like landlords.

What B&O Tax Is and Why It's Different

Before getting into the specifics, it helps to understand what Washington's B&O tax actually is — because it works differently from sales tax and catches a lot of out-of-state business owners off guard.

Washington has no state income tax. Instead, it taxes businesses on their gross receipts through the B&O tax. The critical distinction: Washington's B&O tax on gross income applies regardless of whether a business operates at a profit or loss. The B&O tax base is not reduced by deductions for labor, materials, taxes, or other business costs. Fox 59

You pay B&O tax on every dollar of gross rental income — before expenses, before depreciation, before debt service. A facility running at a loss still owes B&O tax on its revenue.

For a self-storage business operating on thin margins, that structure matters. The tax isn't calculated on what's left over — it's calculated on what comes in.

What Rate Applies

The rental or lease of individual self-service storage space is subject to B&O tax at a rate of 1.5% or 1.75%, depending on the aggregate gross income of the business and its affiliates from the prior year. 10TV

The rate is applied to gross rental income — every dollar collected from tenants for storage unit rentals from April 1 onward. Operators with higher prior-year revenue pay the higher rate. Smaller operators pay the lower rate.

For a facility generating $1 million in annual rental revenue, the annual B&O tax obligation is $15,000 to $17,500. For a larger operation with $5 million in revenue, that's $75,000 to $87,500 per year — a meaningful new cost that wasn't there on March 31.

What's Taxable and What Isn't

The new B&O tax applies specifically to rental income. But self-storage businesses often have other revenue streams — and the rules are different for each.

Rental income — B&O taxable, NOT subject to sales tax. Income from the rental or lease of self-service storage units is taxable under the Service and Other Activities B&O tax classification. You do not have to collect sales tax on the rental or lease income.

Retail sales (boxes, locks, packing tape, moving supplies) — subject to both retailing B&O tax AND sales tax. Income from sales of tangible personal property is taxable under the Retailing B&O tax classification, and you must collect sales tax.

Lien sales of defaulted unit contents — it depends. When a self-service storage business sells the contents of a storage unit to consumers, they must collect and remit retail sales tax. When sold to a reseller who provides a valid reseller permit or exemption certificate, no sales tax is required — but you must keep copies of all exemption documents.

The bottom line: rental income and retail sales are taxed under different classifications, at different rates, with different collection obligations. A storage facility that also sells packing supplies is juggling two separate B&O classifications and a retail sales tax obligation simultaneously.

The ANR Status Problem

Here's the compliance wrinkle that's catching the most operators off guard.

Before April 1, many self-storage businesses in Washington were on Active Non-Reporting (ANR) status — a filing classification that allows businesses below certain revenue thresholds to avoid regular filing requirements. Since storage rental income wasn't subject to B&O tax, many operators qualified and simply didn't file.

That changed on April 1.

Self-storage businesses no longer qualify for Active Non-Reporting status if their annual income is more than $125,000, even if they do not make retail sales. If you are currently on ANR status and your gross annual income is more than $125,000, you must update your filing frequency.

For most self-storage facilities — which routinely generate well above $125,000 in annual rental income — ANR status is gone. These businesses now need to file quarterly excise tax returns, add the Service and Other Activities classification to their account, and remit B&O tax on all rental income earned since April 1.

What Operators Need to Do Before July 25

The first quarterly payment covers April, May, and June — three full months of rental income that has been accruing since the law took effect. Here's the action checklist:

1. Register if you aren't already. If you are not already registered with the Washington Department of Revenue, you must complete a business license application. You cannot file a B&O tax return without an active registration. WTHR

2. Add the new tax classification to your account. You will need to add the Service and Other Activities classification when you electronically file your next excise tax return. Log in to My DOR, click Get Started, click File Return in the Excise Tax Return panel, and click Add/Delete Tax Classifications.

3. Calculate your Q2 2026 gross rental income. Total all rental income received from April 1 through June 30. This is your B&O tax base for the first quarterly return.

4. Apply the correct rate. Determine whether your prior-year aggregate gross income puts you at the 1.5% or 1.75% rate. If you're unsure, start with 1.75% — you can true up if the lower rate applies.

5. File and pay by July 25. B&O tax returns must be filed online through Washington's Department of Revenue's MyDOR system. The July 25 deadline is firm. Late filing triggers penalties and interest. Fox 59

6. Update your ANR status if needed. If you were previously on ANR status and your annual income exceeds $125,000, update your filing frequency through My DOR or by calling the Department of Revenue at 360-705-6705 before you attempt to file.

Washington's Broader Tax Expansion

The self-storage B&O tax is part of a larger pattern of Washington expanding its tax base in 2025 and 2026.

ESSB 5794 was one of several bills that eliminated or narrowed longstanding tax preferences. The same legislation also ended the B&O tax exemption for precious metals and bullion sales starting January 1, 2026 — Washington now taxes sales of precious metal bullion and monetized bullion as tangible personal property, imposing both retail sales tax and retailing B&O tax where applicable. WABX 107.5

Washington state relies on a combination of sales and B&O taxes rather than an income tax — and as the state faces ongoing budget pressure, the Legislature has been systematically narrowing exemptions that have historically sheltered certain industries from the tax base. Avalara

Self-storage is the latest industry to lose its exemption. It won't be the last.

The Bigger Picture for Property-Adjacent Businesses

If you own or operate any real-estate-adjacent business in Washington — parking facilities, marinas, RV parks, or other businesses that have historically been treated as real estate rentals — the self-storage change is a signal worth paying attention to.

The Legislature's decision to reclassify storage rentals as a service rather than a real estate transaction reflects a deliberate policy shift: activities that function like service businesses should be taxed like service businesses, regardless of whether they involve physical space. That logic could extend to other property-adjacent revenue streams that currently enjoy B&O tax protection.

The time to understand your exposure is before the Legislature acts — not after.

Operating a self-storage facility in Washington and not sure whether you're registered, which rate applies to your business, or how to handle the July 25 deadline? Book a free consultation with our team at sales.tax. We'll walk through your specific situation, calculate your Q2 exposure, and make sure your first filing is done correctly.

Washington Is Expanding Sales Tax to Services — What Businesses Need to Know

Sales tax is expanding again, and this time it’s hitting services.

Washington State is moving forward with legislation that would expand how sales tax applies to services, a shift that could impact a wide range of businesses.

If you run a service-based business, this is the kind of change you don’t want to ignore.

Here’s what’s happening and what it could mean for your business.

What Is Washington Changing About Sales Tax?

Washington lawmakers are advancing legislation aimed at expanding and clarifying sales tax on services.

Historically, many services were not subject to sales tax. But that’s changing.

The proposed updates would broaden which services are considered taxable, bringing more business activities under sales tax rules.

While final details are still developing, the direction is clear: more services will likely become taxable.

Why States Are Taxing More Services

This shift isn’t just happening in Washington. It’s part of a broader trend across the U.S.

States are expanding sales tax to services for a few key reasons:

In short, taxing services is becoming the next major step in sales tax evolution.

What Types of Businesses Could Be Affected?

If the legislation moves forward, a wide range of service-based businesses could be impacted.

This may include:

Even businesses that have never dealt with sales tax before may now need to register, collect, and file.

Why This Change Can Be Confusing

Sales tax on services isn’t always straightforward.

Rules may depend on:

This creates complexity, especially for businesses operating across multiple states.

What’s taxable in one state may not be taxable in another.

What Businesses Should Do Now

If you provide services in Washington, now is the time to start preparing.

Consider taking these steps:

Planning ahead can help you avoid compliance issues if the rules change.

Final Thoughts

Washington’s move to expand sales tax to services reflects a larger national trend.

As the economy continues shifting toward services and digital offerings, more states are likely to follow.

If your business relies on services, sales tax may soon become part of your day-to-day operations.

Need Help With Sales Tax Compliance?

Keeping up with changing sales tax rules across states can be overwhelming, especially as services become taxable.

At sales.tax, we help businesses understand their obligations, stay compliant, and avoid costly mistakes.

Schedule a free consultation today and make sure your business is covered.