Lawmakers are preparing to vote on SB 5814, HB 2081, and SB 5786, as part of their $12 billion tax package over six years. Washington’s retail sector and burden consumers already grappling with inflation, rising operating expenses, and narrow profit margins.
SB 5814, recently passed by the Senate, would:
- Extend the sales tax to critical services like security, IT, and armored transport, increasing costs for core operations and infrastructure.
- Eliminate exemptions for digital automated advertising, potentially crippling marketing budgets and threatening state competitiveness.
- Increase taxes on cigarettes and nicotine products, risking declining revenues in future budget cycles.
- Require a one-time sales tax prepayment, creating cash flow challenges and administrative complexity.
HB 2081, passed by the House, imposes a 6.1% increase in the Business & Occupation (B&O) tax rate for retailers, rising from 0.471% to 0.50% starting in 2027. It also includes a 5% B&O surcharge on advanced computing, affecting Washington’s tech and innovation sectors.
SB 5786 significantly raises license fees for grocery and convenience stores that sell alcohol, disproportionately impacting small retailers.
In total, the tax package includes:
- A 6.1% B&O tax hike for retail businesses (HB 2081)
- A 5% B&O surcharge on advanced computing (HB 2081)
- Up to 10.4% state and local sales tax on services like IT, security, custom software development, advertising, and more (SB 5814)
- A $975 increase in grocery beer/wine licensing fees (SB 5786)
- A 10% prepayment penalty for sales tax (SB 5814)
These cumulative costs amount to a tax on consumers, increasing the risk of higher prices, more inflation, and deeper economic instability.
Governor Ferguson previously warned the tax package is “unsustainable, too risky, and fails to adequately prepare Washington state for the crisis that looms ahead.” Despite this, lawmakers appear determined to push the package forward, potentially forcing the Governor to consider a veto.
