A new Washington State law—Senate Bill 5814—goes into effect on October 1, 2025, and it will significantly impact customers located in Washington who receive IT, digital, and tech-related services. This change will apply regardless of where the service provider is located and may affect how your organization is billed by vendors like TorchLight, cloud providers, and software consultants.
What the Law Does
Under SB 5814, Washington will begin applying state and local sales tax (typically totaling 9–10% depending on location) to a broader range of services, including:
- IT consulting and technical support
- Network setup, monitoring, and help desk services
- Custom software and website development
- Data processing and cloud infrastructure management
- Digital advertising and marketing services
- Training or virtual instruction services
Previously, many of these services were not subject to sales tax in Washington.
Who Is Affected?
- Any business or organization based in Washington State that purchases IT services from a vendor—regardless of whether the vendor is located in-state or out-of-state
- Customers with remote MSSPs or cloud vendors will still see Washington sales tax applied if the services are used within the state
- This includes both public and private sector clients
Washington uses destination-based sales tax sourcing — so what matters is where the service is received, not where the vendor is based.
What This Means for You
| Impact Area | What You Should Know |
| Increased Costs | Expect between a 7-9% sales tax rate for many IT and cybersecurity services that were previously untaxed. |
| Invoice Changes | You may start seeing detailed tax line items on MSSP and other vendor invoices after October 1, 2025. |
| Vendor Compliance | Out-of-state vendors who meet Washington’s economic nexus thresholds are legally required to collect sales tax. |
| Service Categorization | Not all services are treated equally—some items (e.g., software licenses) may be taxed differently from consulting or managed services. |
How to Prepare
- Review Your Contracts: Identify which services are affected and check if vendors are revising pricing or billing formats.
- Clarify Vendor Tax Practices: Confirm your vendors’ plans to apply sales tax and how they categorize their services.
- Update Budgets: Factor in the expected tax increase for IT services in your 2025–26 planning cycle.
- Ask About Exemptions: Certain services or non-profit/governmental uses may qualify for partial exemptions.
Final Thoughts
Washington’s decision to expand sales tax to cover digital and tech services is part of a growing national trend. For organizations operating in Washington, this means being more strategic about IT service procurement, budgeting, and compliance.
At TorchLight, we’re monitoring these changes closely and are here to help you navigate them with clarity and confidence.