ESSB 5814, which was part of this year’s historically large tax package, will expand the sales tax to more services beginning Oct. 1. We described the bill in detail in our report on the tax package. Our report also discussed the many unintended administrative, legal, and policy ramifications the tax bills—particularly ESSB 5814—could have.

For example, we noted that the bill’s application of the sales tax to digital advertising services but not to non-digital advertising services seemingly runs afoul of the federal Internet Tax Freedom Act. Last week, Comcast filed a lawsuit in Thurston County Superior Court over the bill, apparently making that argument. (The text of the complaint is not publicly available.) The outlook for the enacted budget assumes that ESSB 5814 will increase revenues by a total of $2.681 billion over four years. The Washington State Standard reports that if the provision of the bill that imposes the sales tax on advertising sales is overturned, state revenues would decline by $475 million over the four-year outlook.

Meanwhile, given the fast-approaching implementation date for the bill, the Department of Revenue (DOR) has been releasing interim guidance statements (IGSs) on various provisions of ESSB 5814. (They have not yet published a planned IGS for custom software. When complete, it will be posted here.)

As we discussed in our report on the tax bills, a major implementation question for ESSB 5814 was how DOR would determine where a sale takes place. The IGSs for specific services all note that the services “are subject to tax based on the location where the services are received by the purchaser and other default sourcing rules.”

Additionally, under current law, buyers of certain products that are used concurrently in state and out of state may claim the multiple points of use (MPU) exemption. As the IGSs note, “instead of paying retail sales tax at the time of purchase, buyers claiming the MPU exemption must apportion and report use tax directly to the department.” The IGSs specify that the new services subject to the sales tax under ESSB 5814 that are also digital automated services (DAS) and concurrently available will be eligible for the MPU exemption (unless the DAS is part of a bundled transaction).

The IGSs also include hypothetical examples to help define the services. Following are some notable points in the IGSs that have been published.

Advertising Services. The sourcing question noted above was particularly uncertain for digital advertising services.

The IGS (published 9/17/25) states that the receipt of disseminated advertising “occurs where the result of the advertising services is first used (result of the service), which is the location where the advertising services are disseminated.” If the receipt of advertising services occurs at multiple known locations, “the advertising services must be sourced and allocated to those locations.” Further, DOR writes that it “will accept proportional allocation to each known location based on the amount of the service received at each location or equal proportional allocation to the known locations.” Alternatively, if the receipt of services will be in multiple locations, “the seller and purchaser may allocate the sale to multiple locations based on a reasonable and consistent method.”

If, at the time of sale, the seller does not know where the receipt will occur, “the seller may source the sale to an address for the purchaser in the seller’s books and records.”

For purposes of an MPU exemption, the IGS specifies, “if the advertisement is disseminated to locations inside and outside of Washington through a server(s), the department will presume there is concurrent use.”

Sales tax will not apply to advertising services sold between members of an affiliated group.

Temporary Staffing. The IGS (published 9/17/25) clarifies that hiring a worker directly—even if the worker is intended to be temporary or is an independent contractor—means that a business has not purchased temporary staffing services and is not subject to retail sales tax or the retailing B&O tax. Additionally, third-party outsourcing services (e.g., call centers) are not considered temporary staffing services. A company that provides temporary staffing services hires its own employees and assigns those employees to work for other organizations temporarily. Temporary staffing services sold between members of an affiliated group are subject to sales tax.

Live Presentations. The IGS (published 9/12/2025) provides an inexhaustive list of what will be considered taxable live presentations: art workshops, CPR classes, continuing legal education, and driving education courses, for example. (If such classes are provided by a K–12 school or an accredited higher education institution, they would not be taxable.) Taxable live presentations can take place either in person or online. According to DOR, “live presentations” specifically do not include, for example, preschool classes, concerts, or fundraisers.

Interestingly, DOR has not yet determined how it will handle the tax treatment of live presentations sold between members of an affiliated group. (The IGS says it will be updated on this point “shortly.”) As we wrote in our report on the tax bills, ESSB 5814 appears to apply the sales tax to in-person live presentations between members of affiliated groups but not to live presentations between members of affiliated groups that take place via the internet.

IT Services. The IGS (published 9/12/2025) notes that under ESSB 5814, IT services include data processing services. According to the IGS, data processing services include, for example, payroll processing. IT services that are sold between members of an affiliated group are not subject to sales tax.

Security Services. Under ESSB 5814, investigation, security, security monitoring, and armored car services are subject to the sales tax. The IGS (published 9/12/2025) provides an exclusive list of services that are considered “investigation services.” (Any future additions to the list will be enforced prospectively.) The list includes, for example, background check services. “Investigation, security, security monitoring, and armored car services” explicitly do not include locksmiths and forensic accounting, for example.

Custom Website Development. The IGS (published 9/12/2025) notes that custom website development services sold between members of an affiliated group are not subject to sales tax.

Digital Automated Services (DAS). Generally, the sale of DAS (services transferred electronically that use software applications) is subject to sales tax. ESSB 5814 eliminates an exclusion for any service that “primarily involves the application of human effort.” The IGS (published 9/12/2025) concludes “that the Legislature did not intend professional services to become taxable solely because the representation of those professional services may be made electronically available through a digital automated service.”

Existing Contracts. The IGS (published 8/29/25) defines an “existing contract” as one that “was signed and executed prior to October 1, 2025.” Given an existing, unaltered contract for services that are considered a retail sale as of Oct. 1, 2025, the IGS states that DOR “will accept tax reporting under the tax classification that applied to the underlying contract activity prior to October 1, 2025, and will allow this treatment through March 31, 2026.”