Article
2025 Washington state legislative session update: Prepare for excise tax changes
May 22, 2025 · Authored by Adam Cline, Sarah Correia
The 2025 Washington legislative session adjourned April 27, with the legislature approving a $77.87 billion two-year state operating budget, including a variety of excise tax increases and other changes.
Explore the Washington State excise tax changes and how they can impact Washington businesses with the following insights.
Business and occupation tax
The business and occupation (B&O) tax is imposed on gross receipts under various classifications. The most common B&O tax classifications are retailing, wholesaling, manufacturing, and service and other activities.
Tax rate increases
Beginning Jan. 1, 2027, Engrossed Substitute House Bill (ESHB) 2081 enacts B&O tax rate increases to 0.5% for the following business activities:
- Retailing
- Wholesaling
- Standard manufacturing and extracting
- Manufacturing, retailing, and wholesaling of commercial airplanes and component parts
- Printing and publishing of periodicals or magazines
- Chemical dependency treatment
- Salmon canning services
- Insurance agents
- Childcare
- Cold storage warehousing
- Highway contractors and government contracting
Additionally, beginning Oct. 1, 2025, the B&O tax rate for businesses with more than $5 million of gross receipts from service and other activities will increase from 1.75% to 2.1%.
Tax surcharge increases
In addition to these tax rate increases, ESHB 2081 also increases the:
- Surcharge on specified financial institutions increases from 1.2% to 1.5%
- Surcharge on advanced computing services increases from 1.22% to 7.5%
Additionally, a new 0.5% B&O surcharge is imposed on taxpayers with taxable income over $250 million. Persons engaged in farming and taxpayers subject to the advanced computing surcharge are not subject to this surcharge.
Washington DOR clarifies sales tax treatment of pre-Oct. 1, 2025, contracts
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.