⚠️ Important: Effective October 1, 2025, many services that nonprofits once treated as exempt — including custom software, website design, IT services, and even live presentations — will be subject to Washington’s retail sales tax.
If you’re running a nonprofit in Washington, this change affects you. Even if you’ve never thought of your organization as “taxable,” the state is shifting the rules. Now’s the time to get clear on what’s changing, why it matters, and how to prepare.
The Myth: “Nonprofits Don’t Pay Sales Tax”
A common misconception: nonprofits are automatically exempt from sales tax.
The truth: Washington does not give nonprofits a blanket sales tax exemption.
Here’s what that means in practice:
- Purchases are taxable. When your nonprofit buys office furniture, supplies, catering, construction work, IT contracts, or software, you pay sales tax like any business.
- Sales are taxable. If you sell merchandise, charge admission, or run workshops, you must collect and remit sales tax.
- Fundraisers are limited exceptions. Some fundraising activities qualify for exemptions — but they’re narrow. Unless you meet very specific criteria, assume sales tax applies.
👉 Bottom line: nonprofits in Washington are treated much like for-profits when it comes to sales tax.
What’s Changing on October 1, 2025
The new law (ESSB 5814) expands the definition of “retail services.” This has two major implications for nonprofits:
1. IT & Technology Services
Before:
- Prewritten software, hardware, and updates were taxed.
- Custom software, development, and website design could avoid tax if clearly itemized.
After (Oct. 1, 2025):
- Custom software, website design, customization, and development are taxable.
- Many IT services — including help desk support, system integration, hosting, and data processing — are also taxable.
- Bundled contracts (design + hosting + maintenance) will often be taxed in full unless separated into line items.
2. Live Presentations & Events
Workshops, seminars, lectures, and even real-time virtual events are treated as retail sales.
That means:
- If your nonprofit charges attendees, you must collect and remit sales tax.
- If you hire a contractor to deliver a paid presentation, the transaction may also be taxable.
- Ticketing and event registration systems need to account for sales tax.
Services Newly Subject to Retail Sales Tax (As of Oct. 1, 2025)
According to the Washington Department of Revenue, these categories of services or activities will be treated as retail sales and taxed:
| Service / Activity | What It Includes / Notes |
|---|---|
| Advertising services | All digital and nondigital services involved in creation, preparation, production, or dissemination of ads. Includes layout, art direction, graphic design, campaign planning, ad placement, SEO, lead-gen, monitoring & evaluation. |
| Live presentations | Lectures, seminars, workshops, and courses where participants attend in person or virtually in real time (interactive). |
| Information technology (IT) services | Help desk, technical support, network operations, system support, data entry, data processing, in-person training for hardware/software, etc. |
| Custom website development services | The full spectrum: design, development, and support of websites. |
| Investigation, security, and armored car services | Background checks, security guards, event security, security system monitoring, cash transport, etc. (Note: locksmith services are excluded). |
| Temporary staffing services | Providing workers to other businesses temporarily under contract (with certain hospital exceptions). |
| Sales of custom software & customization of prewritten software | Includes: • Custom software, whether sold or licensed • Customization of prewritten (off-the-shelf) software • Right to access/use custom software (subscription, per user, etc.) • Customization regardless of delivery (cloud, on-premises, etc.) |
| Changes to DAS (Digital Automated Services) exclusions | ESSB 5814 removes exclusions for services primarily involving human effort, advertising, live presentations, and data processing from DAS. Telehealth/telemedicine are explicitly excluded from DAS. |
Why This Matters
These changes hit nonprofits on multiple levels:
- Budgets will shift. Tech projects, websites, advertising, and training programs will cost more.
- Compliance is critical. Failing to collect or pay sales tax can mean back taxes, penalties, and interest.
- Contracts are risky. Bundled invoices without itemization are likely to be taxed in full.
- Fundraisers aren’t safe. Unless your event qualifies under narrow exemptions, assume sales tax applies to tickets and merchandise.
What Your Nonprofit Should Do Now
- Review vendor agreements – Check IT, design, advertising, and event contracts that extend past October 2025. Negotiate for itemized invoices.
- Audit your events – Update ticketing and registration systems to include sales tax. Communicate changes to attendees.
- Adjust budgets and pricing – Build sales tax into budgets now, so you’re not scrambling later.
- Consider timing – Where possible, complete or prepay major projects before October 1, 2025.
- Document everything – Clear invoices and records are your best defense in an audit.
- Train your team – Make sure staff and board members understand the new rules.
The Takeaway
For years, nonprofits in Washington could treat custom development, IT projects, advertising, and certain events as exempt from sales tax. Starting October 1, 2025, that changes.
Nonprofits must now plan for:
- Tax on custom software, website design, and IT services.
- Tax on advertising, staffing, and security services.
- Tax on live presentations, workshops, and trainings.
Without preparation, this could squeeze budgets and add compliance headaches. Plan now, so your mission isn’t derailed later.
✅ Want help reviewing contracts, updating systems, or communicating this change to your board?
Let’s talk. We help nonprofits adapt so they can focus on impact — not tax surprises.
