Prime Highlights:

• Washington Gov. Bob Ferguson signs into law new tax reforms to fund a $16 billion budget deficit.
• The bill applies sales tax to professional and digital services and raises taxes on big technology companies considerably.

Key Facts:

• Senate Bill 5814 applies sales tax to digital and professional services from October 2025.
• House Bill 2081 raises business and occupation (B&O) tax and raises surcharges on corporations with more than $250 million in annual revenue.

Key Background

In an effort to close a projected $16 billion deficit, Washington Governor Bob Ferguson signed into effect two meaningful tax bills that will transform the state business landscape. The first, Senate Bill 5814, broadens the retail sales tax base to embrace digital and professional services including marketing, consulting, and information technology support. These reforms are set to be implemented in October 2025, so companies that provide such services will have to impose sales tax on customers.

The second, House Bill 2081, targets high-income large corporations. It increases the business and occupation (B&O) tax rate and imposes a high surtax on companies with over $250 million of taxable income per year. The new surtax specifically targets advanced computer companies—largely large technology companies such as Microsoft and Amazon—increasing their tax rate to 7.5% from 1.22% and limiting payments to $75 million, from $9 million.

Though Governor Ferguson was aware that the changes would have unintended effects, he remained committed to their budgetary requirement. He acknowledged that the legislative process advanced at a precipitous pace and indicated a readiness in the future to modify them following business input during the subsequent budget cycle.

Business leaders reacted cautiously. Technology association officials and industry groups contend that the new taxes hurt competitiveness, push companies out of state, and weaken Washington’s image as an innovation hub. Microsoft President Brad Smith spoke of the dangers of taking the tech industry for granted and encouraged lawmakers to keep revenue raising and economic growth in balance.

The new policies are estimated to raise more than $3 billion in revenues over the next biennium. But their ultimate impact on business investment and the overall economy is a subject of hot debate.