Digital Services and Sales Tax: What Bill 5418 Means for Your Business Starting October 1, 2025

Washington State is making a big shift in how digital business is taxed. As of October 1, 2025, Bill 5418 takes effect, expanding the state's sales tax laws to include digitally delivered services. This means that services provided electronically — even without physical goods or in-person interaction — may now trigger sales tax obligations.

If your business sells or uses digital services in Washington, this change affects you.

What Does Bill 5418 Cover?

Bill 5418 redefines taxable services to explicitly include those that are:

• Delivered through digital means, such as downloads, streaming, or cloud platforms

• Accessed remotely, including subscription-based tools or automated online platforms

• Provided electronically in any form, even if there's no physical product or human touchpoint

  
  

This update aligns Washington's tax laws with today’s tech-driven business landscape.

How This Impacts Your Business

If You Sell Digital Services:

You’ll now be required to:

• Collect and remit Washington sales tax on qualifying digital services

• Update pricing and invoicing to reflect the added tax

• Register with the Washington Department of Revenue if you haven't already

• Possibly reassess your nexus status — even remote sellers may have tax responsibilities

If You Buy Digital Services:

Expect to see sales tax added to many digital subscriptions and online tools you use — including:

• Cloud-based accounting or CRM platforms

• Software as a Service (SaaS) subscriptions

• Online design tools

• Downloadable templates, reports, or educational materials

What You Should Do Now

• Audit Your Offerings: Review all digital services you sell. Are they streamed, downloaded, or accessed online? If so, they're likely taxable.

• Update Systems: Ensure your billing platform is set up to charge and track Washington sales tax starting October 1.

• Talk to a Tax Advisor: This change can get complex — especially for businesses selling into Washington from other states.

• Notify Your Clients: Transparent communication is key: if you're adding sales tax to invoices, let your customers know why.

Why This Law Matters

Bill 5418 is part of Washington’s broader effort to modernize its tax code and level the playing field between traditional service providers and digital businesses. It reflects a growing trend nationwide — and for many Washington businesses, it marks the beginning of new tax collection and compliance responsibilities.

Need Help Navigating the Change?

At True Balance Accounting, we’re already working with clients to prepare for Washington’s new rules. If you sell digital services or use them in your business, we’ll help you:

• Determine what’s taxable

• Update your systems

• Stay compliant — without surprises

💬 Questions? Book a consult today.

Change is coming. Let’s make sure your business is ready for it.