INSIGHTS

Washington’s 2025 Tax Shift: Positioning Your Business for the Road Ahead

by Jennae Thompson, CPA, MSA

ARTICLE | September 30, 2025

Recent developments in Washington tax law are reshaping how businesses across industries should approach compliance in 2025.

The Court of Appeals confirmed that for wholesale drop shipments, “the location of the customer—not the shipping destination—controls taxability” (Larson Gross). This means wholesalers and distributors must carefully track customer locations, especially when shipping across state lines.

Washington’s new tax reform package brings “broad changes to Sales and B&O taxes” that will affect many sectors (Larson Gross). Newly taxable services include IT, digital advertising, staffing, and live presentations. Large businesses with income over $250M will also face a new 0.5% surcharge, alongside higher rates for financial institutions and advanced computing firms.

State and local tax laws often change, so it’s important to stay informed and regularly review how new rules may affect your business. Whether you’re a wholesaler, service provider, or large enterprise, now is the time to revisit your tax practices and prepare for the year ahead

Executive Summary

Starting October 1, 2025, Washington will expand its retail sales tax to cover many services, including advertising, digital automated services (DAS), and other technology-based solutions. For Washington-based businesses, this change has significant implications. The Department of Revenue’s interim guidance confirms that while these services will now be taxable, businesses can utilize the Multiple Points of Use (MPU) exemption when services are used both inside and outside Washington. MPU allows companies to apportion tax liability across states, rather than paying full Washington sales tax up front.

For companies in construction, agriculture, software, and professional services, MPU provides opportunities for tax efficiency—but also comes with new compliance responsibilities. To stay ahead, firms should evaluate service contracts, update invoicing systems, and establish defensible allocation methods supported by clear documentation. This document provides a detailed breakdown of the changes, industry-specific considerations, and a checklist to help you assess eligibility and exposure.

Washington Sales/Use Tax on Services: What MPU Means for WA-Based Compnies

Quick take: Beginning Oct. 1, 2025, Washington taxes many services—including advertising services—as retail sales. For digitally delivered advertising that meets the “digital automated service” (DAS) definition, buyers may use Multiple Points of Use (MPU) to allocate use across states and self-accrue the right amount of sales/use tax. Sellers default to destination-based sourcing unless a valid MPU (or direct pay) certificate is on file.

Why This Matters if Your Company is in Washington

  • DOR’s Interim Guidance confirms advertising services are retail sales; when provided digitally and qualifying as DAS, they’re treated as digital products eligible for exemptions, including MPU.
  • Practically, that means: before Oct. 1, 2025—B&O only (no sales/use tax). On/after Oct. 1, 2025—retail sales tax applies; buyers using the service inside/outside WA may present an MPU certificate and take on allocation and use-tax reporting.
  • DOR’s advertising IGS also explains how to source retail services when the receipt location isn’t clear, and recognizes buyer-provided MPU or direct-pay documentation for multi-state use.

Independent commentary flags that sourcing remains tricky, especially for digital ads and multi-state campaigns—so documentation and a defendable allocation method are critical.

Action Checklist: Evaluate MPU Eligibility and Your Sales/Use Tax Exposure

For All WA businesses (Start Here)

  1. Map your services & delivery: What services do you buy/sell that are now retail (ads, DAS, software, IT, staffing, etc.)? Where are they received? (Default destination-sourcing applies.)
  2. Determine DAS status: If digital, does the service meet DAS criteria, opening the door to MPU?
  3. Assess multi-state use: Is the service used both in and outside WA (e.g., nationwide ad campaigns, multi-state users)? If yes, consider MPU.
  4. Certificates & contracts: Do you have a valid MPU or direct-pay certificate ready for vendors? Have you addressed existing contracts that span the 1, 2025 effective date?
  5. Build a reasonable allocation method: What data can you support—e.g., impression geography, user logs, sales-by-state proxy—if precise usage data is unavailable? (Document assumptions.)
  6. Invoice & system readiness: Can your AP/AR systems store certificates, code MPU purchases to self-accrue use tax, and reflect destination rates? (Vendors are prompting MPU uploads.)
  7. Governance: Who signs certificates? How will you reconcile allocations to actuals and update rates? Schedule periodic reviews

Construction Firms

When MPU may apply: Digital project-management platforms, construction design/visualization tools delivered as DAS, digital marketing for multi-state pursuits.

Key questions:

  • Are your ads targeting multiple states (bids, recruiting, brand)? If yes, MPU may fit.
  • Do field crews or clients outside WA access paid digital tools (DAS)?
  • Are job site services billed to WA HQ but consumed on out-of-state projects?

Data you might use: Campaign geo-impressions; project revenue by state; user access logs.

Agribusiness

When MPU may apply: Grower or brand advertising across regional/national markets; digital agritech subscriptions (DAS) used on farms in multiple states.

Key questions:

  • Do you advertise to buyers or distributors outside WA?
  • Are agronomy or IoT analytics tools accessed on fields in OR/ID/MT, etc.?

Data you might use: Distribution/sales by state; device location or farm-site usage; retailer lift reports.

Software & Tech

When MPU may apply: Marketing in multiple states, SaaS features that are DAS, support or implementation services with out-of-state users.

Key questions:

  • Where are end users located? Do you have usage telemetry by region?
  • Are implementation or success services received outside WA?

Data you might use: Active users by state; logins/IP regions; contract seat assignments; support ticket geography

Services Firms (Agencies, Professional Services, MSPs)

When MPU may apply: Multi-state ad buys, analytics dashboards (DAS), regional events/webinars.

Key questions:

  • Can you separate where clients receive the service vs. your WA office location (sourcing hierarchy)?
  • Do you qualify for resale on pass-through ad inventory, or is MPU more appropriate? (See IGS FAQ.)

Data you might use: Media mix geo-allocations; client billing addresses; event attendee states

 

Practical Steps to Put This in Place (Seller & Buyer)

If you’re the seller (WA-based or selling to WA customers):

  • Collect documentation: Ask buyers for MPU or direct-pay if they claim multi-state use; otherwise source per the hierarchy (place of receipt → buyer address in records → payment instrument address → place of performance).
  • Invoice updates: Show WA retail sales tax unless valid documentation is on file; maintain certificate retention procedures.
  • Train teams: Contracting, billing, and rev-ops should understand sourcing and certificate rules.

If you’re the buyer (WA address, multi-state use):

  • Issue MPU certificates to key platforms (e.g., ad vendors) and self-accrue use tax by your allocation. Vendors are already enabling MPU uploads ahead of 10/1.
  • Document allocation: Keep the workpapers behind your method (e.g., impressions by state, revenue proxy). Revisit quarterly.

Staying Informed

As the state continues to provide guidance, we highly recommend signing up with the Washington State Department of Revenue to be emailed free updates by clicking here.

Additional Resources Provided by the Washington Department of Revenue:

 

What We’re Watching

Ongoing clarificationsDOR notes that interim guidance can be relied upon now, with more updates expected as rules finalize.

Industry commentary continues to press on ambiguous sourcing for digital ads—expect refinements.

Need a Second Set of Eyes?

Larson Gross helps Washington companies assess MPU eligibility, set defensible allocation methods, and tune systems for compliant AP/AR workflows—so you’re ready for Oct. 1 and beyond.

Larson Gross is here to walk you through these changes and help you make the most of them for your operation. Please contact us to learn more at 800-447-0177.

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Jennae Thompson, CPA

Jennae Thompson, CPA

State & Local Tax Practice Leader

In 2022, Jennae joined Larson Gross as a State and Local Tax Manager, working remotely from her home in Bend, Oregon. During her career, she has had the opportunity to service clients in a wide variety of areas including individuals, small to large businesses, homeowners’ associations, non-profit organizations, and governmental municipalities. She has an active Certified Public Accountant license and holds an Oregon Municipal Auditors license.