What Services Are Not Taxable in Washington State?

Washington imposes a retail sales tax, which primarily applies to the sale of tangible personal property and a specific list of services. The foundational principle is that a service is not subject to sales tax unless a state law or rule explicitly defines it as a “retail sale.” This approach is the opposite of how tangible goods are treated, where most items are presumed taxable unless a specific exemption applies.

The state’s tax code contains the authoritative list of what constitutes a taxable retail service. A business providing a service does not need to prove its offering is exempt; rather, the service is inherently non-taxable if it does not appear on the state’s list. If a service is not explicitly listed as a retail sale, a business should not charge sales tax on that service.

For instance, while the act of repairing a car is defined as a retail sale and is taxable, the service of providing legal advice has historically been treated differently. The difference is not based on the value or nature of the service itself, but purely on its inclusion in the statutory definition of a retail sale.

Even if a service is not subject to retail sales tax, the business providing it is still subject to the Business and Occupation (B&O) tax. The B&O tax is a gross receipts tax levied on the act of doing business in the state. Therefore, the absence of a sales tax requirement does not eliminate a business’s overall tax responsibilities.

Categories of Generally Non-Taxable Services

A broad range of services fall outside the state’s definition of a retail sale and are therefore not subject to sales tax. These can be grouped into several common categories, providing a clearer picture for both consumers and service providers.

Professional Services

Historically, services that involve specialized knowledge and expertise, such as legal, accounting, architectural, and engineering services, have not been considered retail sales. However, a change in state law will take effect on October 1, 2025. After this date, many professional services will become subject to retail sales tax if they are delivered electronically, such as via email, client portals, or video conferencing.

Personal and Instructional Services

Many services tailored to an individual’s personal development or needs are not taxable. This includes educational services like academic tutoring or music lessons. Fitness instruction, personal training sessions, and basic haircuts and styling are also non-taxable.

Financial and Real Estate Services

While many core financial services, such as account management or loan processing, are not subject to retail sales tax, this category has exceptions. Certain financial services, including escrow and credit bureau services, are specifically defined as retail sales and are therefore taxable. The services provided by a real estate agent or broker to facilitate the sale of a property are not defined as retail sales. Insurance services, including the work of agents and brokers in selling policies, also fall into this non-taxable category.

Common Services That Are Taxable

To better understand which services are not taxed, it is helpful to recognize those that are explicitly defined as retail sales and are, therefore, taxable. The state legislature has specifically identified numerous services whose sale requires the collection of retail sales tax.

Charges for repairing tangible personal property for consumers are retail sales and are subject to sales tax. This applies to the total charge for the service, including both labor and materials. Activities related to land are frequently taxable, including services like landscaping, lawn mowing, and horticulture services. Janitorial and building cleaning services are also defined as retail sales.

The automotive sector features several taxable services, such as towing a vehicle and the labor involved in vehicle repair. Charges for parking in many commercial lots are also taxable. Telecommunication services, including mobile phone plans and internet access, are on the list of taxable retail services. Other taxable personal services include tattooing and tanning.

Bundled Transactions and Separately Stated Charges

Businesses often sell taxable goods and non-taxable services together in a single transaction, which can complicate sales tax collection. The state uses a “true object test” to determine the primary purpose of the customer’s purchase in these bundled situations. If the main goal is to acquire the taxable good, the entire charge, including the service component, may become taxable.

The most direct way to handle these transactions is to clearly separate the charges on the customer’s invoice. If a non-taxable service is sold alongside a taxable product, the invoice should list each item with its own price. This practice ensures that sales tax is only applied to the taxable portion of the sale. Without this separation, the entire transaction amount is generally presumed to be taxable.

Consider a company selling a computer system. An incorrect invoice might show a single line item: “Computer System: $1,500,” making the entire amount subject to sales tax. A correct invoice would break down the transaction: “Computer Hardware: $1,200” and “On-site Setup Service: $300.” With this clear separation, sales tax would only be calculated on the $1,200 for the hardware.