Yes. Washington offers temporary penalty relief for qualifying businesses that failed to collect retail Sales Tax or pay deferred sales tax on Services made taxable by ESSB 5814. The Washington Department of Revenue says eligible businesses can request relief through its Voluntary Disclosure Application. The program is available through September 30, 2027, but the relief is limited: it can waive qualifying penalties, not the underlying tax or interest.
The newly taxable services generally include advertising, live presentations, information technology services, custom website development, investigation and security services, armored car services, temporary staffing, and sales of custom software or customization of prewritten software. The details and exclusions vary by service. Existing contracts may receive a limited transition treatment under Department of Revenue guidance, but that is not a blanket grace period. Check the contract terms and service classification before deciding what to collect or report.
Key takeaways
- Washington offers temporary ESSB 5814 penalty relief for qualifying tax obligations tied to newly taxable services.
- The program waives qualifying penalties, not the underlying tax or interest.
- Applications go through the Department of Revenue’s Voluntary Disclosure Application and are due by September 30, 2027.
- Covered service categories include advertising, live presentations, IT, custom website development, security, temporary staffing, and custom software.
- Some pre-change contracts may receive limited transition treatment, but eligibility depends on the contract and department guidance.
What Washington’s ESSB 5814 penalty relief covers
The Department of Revenue’s temporary ESSB 5814 program is intended for businesses with uncollected retail sales tax or unpaid use tax arising from the law’s expansion of taxable services. A qualifying business may ask the department to waive penalties associated with those obligations by applying through the Voluntary Disclosure Application. This is a targeted program for the ESSB 5814 changes, not a general waiver for unrelated tax debts or filing problems.
Relief is not automatic. The department reviews the application and the business’s circumstances, including whether the tax at issue is connected to the newly taxable services and whether the relevant reporting periods fall within the program. If you sell through Amazon, Shopify, Etsy, Walmart, or your own store, first determine whether you are the seller responsible for collecting and reporting tax on the particular transaction; marketplace arrangements and the nature of the service can affect the analysis.
Which services became taxable on October 1, 2025?
Washington Department of Revenue guidance identifies these broad categories as newly subject to retail sales tax when sold to a consumer: advertising services; live presentations; information technology services; custom website development; investigation, security, and armored car services; temporary staffing; and sales of custom software or customization of prewritten software. Examples include ad design and placement, real-time online workshops, IT support and consulting, custom website design and support, security services, supplying temporary workers, and customized software.
These are category descriptions, not a rule that every service with a similar label is taxable. The department lists exclusions and service-specific guidance. Examples include web hosting and domain registration in relevant categories, locksmith services, certain staffing arrangements, and specified advertising activities. Telehealth and telemedicine are also excluded from the digital automated services definition under the law. Review the department’s current service-specific guidance before classifying a bundled or unusual offering.
Who qualifies, and which tax periods are covered?
The program is for businesses with retail sales tax or use tax obligations caused by ESSB 5814’s newly taxable services. The department’s program announcement describes relief for qualifying businesses with uncollected retail sales tax or unpaid use tax resulting from those changes. It does not mean every seller with a late return, unpaid balance, or other tax issue qualifies. The exact position depends on your circumstances—confirm with the state, or talk to us and we will check it for you.
The program covers qualifying reporting periods beginning October 1, 2025, through December 31, 2026, according to the Department of Revenue’s program information. Contract transition rules can affect when a particular sale is treated as taxable, so do not assume that every invoice issued during this span has the same treatment. Keep invoices, contracts, amendments, payment records, and tax returns available to support the periods and transactions in your request.
How to apply, when to apply, and what happens next
Apply through the Washington Department of Revenue’s Voluntary Disclosure Application. When completing it, identify that you are requesting penalty relief related to the ESSB 5814 sales tax changes. Explain the services involved, the affected reporting periods, and the tax obligations you are disclosing; provide the information and records the department requests. The department’s application process is the route identified for this temporary program.
The application deadline is September 30, 2027, and the program is available through that date. Do not treat the end date as a reason to delay: you still need to determine and report the tax correctly, and the department must review your request. After approval, the relief applies to qualifying penalties as determined by the department; it does not erase the tax balance or interest. Confirm the approval terms and any remaining payment or filing requirements directly with the department.
What the relief does—and does not—waive
The program offers penalty relief. It does not waive the underlying retail sales tax or use tax, and it does not waive interest. A business that qualifies should therefore plan to report and pay the tax due, along with any interest that applies, even if the department approves a penalty waiver. Penalty relief should not be confused with an exemption from tax or permission to continue not collecting tax.
For sellers, this distinction matters when pricing services and reconciling past transactions. A penalty waiver may reduce the cost of correcting a past compliance issue, but it does not change whether a transaction was taxable. If you need help assessing your broader obligations, our pages on Economic nexus in Washington, Sales tax registration in Washington, and Sales tax permit in Washington explain related compliance steps.
How to report and pay tax on newly taxable services
If you sell a covered service to a consumer and no exemption applies, Washington generally requires the seller to collect retail sales tax and report it to the Department of Revenue. The seller also needs to report the income under the applicable business and occupation tax classification. If tax was not collected when due, the department says deferred sales tax may be due in relevant circumstances. The precise treatment depends on the transaction, customer, service, and any applicable exemption.
Review your service descriptions, invoices, checkout settings, and accounting records so that taxable services are identified and tax is collected where required. Marketplace sales-tax collection does not necessarily resolve every obligation for services or other sales, so check who is responsible for each transaction. For practical filing and registration context, see Sales tax filing in Washington and Sales Tax. Our Services page describes the human support we provide; we are a done-for-you service, not tax software.
How existing contracts affect the transition
Washington Department of Revenue interim guidance provides a limited transition treatment for certain contracts executed before October 1, 2025, covering services that continue after that date and would otherwise become taxable. For qualifying contracts, the department may treat the sale as occurring before the change or accept reporting under the prior tax classification for a limited transition period, depending on the contract and the applicable guidance. The department’s guidance allows the specified prior treatment through March 31, 2026, with retail sales tax and retailing B&O reporting generally required for periods beginning on or after April 1, 2026, unless another rule applies.
This is not a general grace period for every existing agreement. The contract must meet the department’s criteria, and an existing contract altered after October 1, 2025, may become subject to the new treatment when altered. A seller may also elect to report under the new classification earlier, in which case the department’s guidance says retail sales tax must also be collected unless a valid exemption applies. Review the signed agreement, scope, amendments, billing terms, and service dates; do not rely on the contract’s age alone.
Which services may be exempt under later changes?
Washington’s Department of Revenue lists exclusions from the newly taxable categories, and later legislative changes may alter the treatment of particular services. The official state materials available here identify exclusions such as telehealth and telemedicine from the digital automated services definition, as well as service-specific exclusions involving advertising, staffing, security, and other categories. The department’s current service page also describes exclusions for certain advertising activities, including specified newspaper, broadcast, signage, and out-of-home advertising.
Do not assume that a proposed change, bill summary, or broad industry label creates an exemption for your service. The exact position depends on the service and the current statutory and Department of Revenue guidance. Confirm the current rule with the state, or talk to us and we will check it for you before changing invoices or filing positions.
Washington ESSB 5814: practical treatment by issue
| Issue | General treatment | What a seller should verify |
|---|---|---|
| Newly taxable service | Retail sales tax generally applies to covered consumer sales; retailing B&O reporting may also apply. | Whether the actual service fits a covered category and whether a specific exclusion or exemption applies. |
| Past tax not collected | A qualifying business may request waiver of related penalties through the temporary program. | That the obligation results from ESSB 5814, the periods qualify, and the application is submitted by the program deadline. |
| Tax and interest | Penalty relief does not waive the underlying tax or interest. | The amount due and payment instructions from the Department of Revenue. |
| Pre-change contract | Some qualifying contracts may receive limited transition treatment under department guidance. | Execution date, continuing services, contract changes, reporting period, and whether the seller elected new treatment. |
| Future or service-specific exclusion | Some activities are excluded, and rules can change through legislation or updated guidance. | The current statute and Department of Revenue guidance for the precise service—not just its marketing name. |
Frequently asked questions
Does Washington offer penalty relief for newly taxable services?
Yes. Washington offers temporary penalty relief for qualifying retail sales tax or use tax obligations resulting from ESSB 5814’s newly taxable services. Businesses apply through the Department of Revenue’s Voluntary Disclosure Application, and approval is not automatic.
Does the relief waive tax and interest, or only penalties?
It is penalty relief only. The underlying tax and any applicable interest remain due, even if the department approves a penalty waiver.
When does Washington’s temporary penalty relief program end?
The Department of Revenue says the program is available through September 30, 2027. The application must be submitted by that date, and businesses should confirm current requirements with the department rather than waiting until the deadline.
Are existing contracts eligible for transition or grace-period relief?
Some contracts executed before October 1, 2025, may qualify for limited transition treatment under Department of Revenue guidance if they meet the stated criteria. The guidance allows specified prior reporting treatment through March 31, 2026, with new treatment generally applying to reporting periods beginning on or after April 1, 2026. Contract amendments and other facts can change the result.
Which newly taxable services will Washington exempt in the future?
The official materials identify exclusions and service-specific exceptions, including telehealth and telemedicine from the digital automated services definition and exclusions in certain advertising and other categories. Whether a particular service is exempt depends on the current law and detailed guidance; verify the rule for the exact service before relying on an exemption.
Official sources
- https://dor.wa.gov/taxes-rates/retail-sales-tax/services-newly-subject-retail-sales-tax
- https://dor.wa.gov/taxes-rates/retail-sales-tax/services-newly-subject-retail-sales-tax/frequently-asked-questions-about-essb-5814
- https://dor.wa.gov/laws-rules/interim-guidance-statement-regarding-contracts-existing-prior-october-1-2025-and-changes-made-essb
- https://dor.wa.gov/laws-rules/interim-guidance-statement-regarding-changes-made-essb-5814-das-exclusions-and-definition-retail
Related reading
- Economic nexus in Washington
- Sales Tax
- Sales tax filing in Washington
- Sales tax permit in Washington
- Our sales tax compliance services
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Reviewed by Paul le Roux, CA(SA). Sales Tax Compliance USA handles US sales tax registration, filing and remittance for cross-border and domestic ecommerce sellers as a fully managed service.
This article is general information for educational purposes and does not constitute legal or tax advice. Sales tax rules change and depend on your specific facts. Consult a qualified tax professional about your own position.