The 2025 Washington State legislative session has been one of the most consequential for Washington residents and small businesses in recent memory. Lawmakers, facing a historic, self-created estimated $16 billion budget shortfall, responded with a sweeping package of new taxes and regulatory changes that will reshape the state’s business climate for years to come.

While the total impact to each individual resident or business is dependent on income and the type of business, the Washington Policy Center (WPC) has compiled the most impactful current taxes, changes in the 2025 budget and an estimate of the impact to a Washington resident making $75,000 a year.

The Washington Policy Center will continue to advocate for policies that create a fair, competitive, and predictable environment for all businesses, large and small. Unfortunately, many of these tax increases will hurt Washington resident pocketbooks and business in the state.

Taxes Imposed on Washington Residents

• Sales and Use Tax: The state sales tax rate is 6.5%, but combined with local taxes, it typically ranges from 7% to 10.5% depending on the city or county (e.g., Seattle’s combined rate is around 10.25%).
   
• Property Tax: Varies by county and local levies, averaging about 0.8% to 1.2% of assessed property value annually (e.g., a $500,000 home might incur $4,000–$6,000 in property taxes). Senate Bill 5167 amends RCW 84.52.043 and RCW 84.52.010, which relates to property tax levies and exemptions. No new property taxes are introduced, but adjustments to levy limits or funding allocations (e.g., for schools or housing programs) could influence local rates.
   
• Business and Occupation (B&O) Tax: Varies by industry (0.471% to 1.5% or higher on gross receipts), but residents don’t pay this directly. This tax on businesses often gets passed on to consumers through higher prices for goods and services, indirectly affecting residents.

• Paid Family Leave: 0.92% of employees gross wages. Over 50 employees, employers pay 71.52% of the premium.
   
• Fuel Taxes: Washington’s gas tax is 55.4 cents per gallon. Diesel is 6 cents higher and other fuels have similar taxes. The Climate Commitment Act’s cap-and-invest program can add an additional 40 cents per gallon. That brings the Washington State portion to over $0.95 per gallon.
   
• Vehicle-Related Taxes and Fees: Residents pay vehicle license fees, registration fees, and taxes like the Regional Transit Authority (RTA) tax in certain areas (e.g., Puget Sound region). For example, car tab fees include a base registration fee (around $30–$60) plus local taxes or fees. 
   
• Capital Gains Tax: As of 2022, Washington state imposes a capital gains tax of 7% on the sale of stocks, bonds, business interests, and other investments, but only if the gains exceed $250,000 in a year. The legislature added 2.9% in 2025 bringing the rate to 9.9% on investments over $1 million. 
   
• Estate Tax: Washington imposes an estate tax on estates with a value greater than $2.193 million (as of 2025). The rate ranges from 10% to 20%, depending on the size of the estate. For larger estates of $9 million and up, the estate tax rate is increasing from 20% to 35%.
   
• Excise Taxes Examples:
  • Cigarette Tax: $3.025 per pack of 20 cigarettes.
  • Liquor Taxes: 20.57% sales tax on spirits, plus $3.77 per liter.
  • Cannabis Tax: 37% on retail marijuana sales.
  • Beer: $0.26 per gallon.
     
• Real Estate Excise Tax (REET): Graduated based on property sale price (1.1% for sales under $525,000, up to 3% for sales over $3.025 million).  Senate Bill 5167 amendments to RCW 82.45.060 (REET) and RCW 36.22.250 (housing-related fees) adjust funding for housing programs, but no new REET rates are introduced.
   
• Document Recording Fees: Fees for recording property transactions (e.g., deeds, mortgages), often $100–$300, apply to residents buying or refinancing homes. These fund housing and homelessness programs.
   
• Professional Licensing Fees: SB 5167 amends RCW sections like 18.04.105 (accountants), 18.43.150 (engineers), and 19.28.351 (electricians), adjusting licensing fees. Residents may face higher service costs if professionals pass on these fees.
   
• Utility Costs: The Climate Commitment Act (RCW 70A.65) increases costs for utilities like electricity or natural gas, passed on to residents through higher bills.

Washington Business Specific Taxes

• Business and Occupation (B&O) Tax: Varies by industry, ranging from 0.471% to 1.5% or higher on gross receipts (e.g., 0.471% for retailing, 1.5% for services, 3.3% for certain financial activities with surcharges). This is Washington’s primary business tax, applied to gross revenue without deductions for expenses. There are a variety of exemptions, such as for certain small businesses under $100,000 in gross receipts (which may be exempt from B&O tax), and businesses operating under specific categories may qualify for reduced rates or credits.  As example,
  • Retailing: 0.471%
  • Wholesale: 0.484%
  • Service and Other Activities: 1.5%
  • Manufacturing: 0.484%
  • Professional Services (e.g., accountants, lawyers, etc.): 1.5%
  • Storage units (new for 2025): 1.75%

There is a new B&O surcharge of 0.5 percent on taxpayers with a taxable income over $270 million which will expire on December 31, 2029.

• Payroll and Employment Taxes: Businesses pay unemployment insurance taxes (rates vary based on industry and experience, typically 0.1%–5.4% of taxable wages) and workers’ compensation premiums through the Department of Labor & Industries (rates depend on risk classification, e.g., $0.10–$2 per hour worked).

• Paid Family Leave: 0.92% of employees gross wages. Over 50 employees, employers pay 71.52% of the premium.
   
• Property Tax on Business Property: Averages 0.8%–1.2% of assessed value, varying by county and local levies.
   
• Sales Tax on Digital Products and Services: Businesses that provide digital products (e.g., software, music, movies) are subject to sales tax. Some services, such as data hosting or cloud services, may also be taxed under Washington's sales tax law.
   
• Expansion in 2025 of Sales Tax on Services: Senate Bill 5814 expands the state’s retail sales tax to include digital and professional services, everything from advertising agencies to software development and IT support. Expected to collect $1.1 billion over two years.
   
• Advanced Computing Surcharge: The advanced computing surcharge, paid by major tech companies, such as Microsoft and Amazon, increased in 2025 from 1.22% to 7.5%. This is capped at $75 million.
   
• Business Licenses and Fees. All businesses are required to obtain a license to operate in the jurisdictions that the business offers products and services. This might be a fixed fee, as an example $75 per year, or a fee based on the number of employee hours worked within a city’s jurisdiction.
   
• Regulatory Fees: Some industries, such as financial services, healthcare, and transportation, may face specific regulatory fees.

Example Taxes for Washington State Resident Earning $75,000 (Single Filer, 2025)