In an effort to close a multibillion-dollar budget deficit, Washington Gov. Bob Ferguson recently approved several bills containing tax increases, including one bill that expands the sales tax base to include additional services, including temporary staffing services.

The bill, SB 5814, expands which industries are covered by the state’s 6.5% tax on retail services. As of Oct. 1, 2025, the term “retail sale” will include, among other services, temporary staffing services. When added to existing local sales taxes, the total sales tax rate on temporary staffing services imposed on consumers and collected by the seller could exceed 10%.

ASA, along with several Washington state staffing firms and other businesses, vigorously opposed the proposed bill as it worked its way through the legislature, arguing that a sales tax on temporary services is “a tax on jobs that will harm Washington’s workers and the state’s economy.”

Following passage of the bill, ASA submitted a letter to the governor urging him to veto the tax on temporary staffing services because it would hurt small businesses, job seekers, and consumers and make Washington an outlier among West Coast states that would place the state at a competitive disadvantage with neighbors that do not impose such taxes.

Because temporary staffing services will now be treated as “retailing” rather than “servicing,” staffing agencies will see a decline in their state’s business and occupation tax. The B&O tax on retailing is currently 0.471%; services are taxed at 1.5%–1.75%. Both rates are scheduled to increase in the future.

To determine the net tax effect of the new sales tax law on their business, ASA members doing business in the state of Washington are urged to discuss the new law with accounting professionals or tax counsel before the changes go into effect.