The Washington Department of Revenue released its Summary of 2026 Legislation, covering tax-related bills enacted during the 2026 legislative session.
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Insurance Exemptions and Advanced Computing Surcharge
HB 2487 clarifies that taxpayers are not exempt from the Washington business and occupation tax simply because they receive income from insurance companies. Only the taxpayer who paid the insurance premium tax may claim the related B&O tax exemption. The clarification applies retroactively to October 2, 2019, but the bill waives penalties and interest for taxpayers that owe retroactive taxes and allows up to three years to repay the balance. The bill also exempts payments received from the sale of annuities from B&O tax. In addition, HB 2487 exempts insurance companies from the advanced computing surcharge and caps the surcharge at $25 million for affiliated groups where more than half of the worldwide revenue comes from insurance premiums. Source: Washington Department of Revenue, Summary of 2026 Legislation, p. 6.
Mortgage Interest Exemption from B&O Tax
SHB 2089 changes who qualifies for the mortgage interest exemption from B&O tax. Previously, banks and other lenders could deduct interest income from first mortgages secured by properties located in 10 or fewer states. Beginning July 1, 2026, that rule is replaced with a new threshold: only lenders with less than $10 billion in annual mortgage originations qualify, regardless of how many states they operate in. Source: Washington Department of Revenue, Summary of 2026 Legislation, p. 6.
Sales Tax Adjustments to 2025 Sales Tax Law
ESSB 6346 makes targeted 2026 adjustments to Washington’s 2025 sales tax expansion under ESSB 5814. Rather than restating the full 2025 law, the key update is that the Legislature partially repealed the sales tax on specified services beginning January 1, 2029, excluded temporary staffing services for hospital-based clinics from the definition of a retail sale, narrowed the definition of “live presentations,” and exempted certain retail services sold to schools and libraries. These changes generally take effect July 1, 2026, except for the delayed partial repeal. Source: Washington Department of Revenue, Summary of 2026 Legislation, p. 15.
Data Center Equipment Sales Tax Exemption
ESSB 6231 narrows Washington’s sales and use tax exemption for data center equipment. Existing exemption certificates for data centers that qualified through refurbishment of a pre-existing facility will expire, and the Department of Revenue may not issue new certificates for refurbished data centers on or after July 1, 2026. Newly constructed data centers may still apply for exemption certificates, but the bill changes what server equipment qualifies. Replacement server equipment, often referred to as a “server refresh,” is removed from the definition of eligible server equipment, meaning the exemption applies only to the first round of original server equipment installed in a qualifying data center. Source: Washington Department of Revenue, Summary of 2026 Legislation, pp. 15–16.
Related KOM Articles Addressing Legislation
For topics KOM has already covered in more detail, readers can refer to these prior articles:
ESSB 5814 Sales Tax Expansion – Background
New Washington Sales Tax Rules Effective October 1, 2025 and Washington’s ESSB 5814 Penalty Relief Program – KOM has previously covered Washington’s 2025 sales tax expansion under ESSB 5814 and the related penalty relief program. Those articles provide background for the 2026 adjustments made by ESSB 6346.
Capital Gains Tax Prepayment
Washington Authorizes Prepayment of Capital Gains Tax – KOM’s article explains HB 1376, which allows taxpayers to submit Washington capital gains tax payments beginning six months before the filing due date.
Estate Tax Modifications
Washington Estate Tax Update: New Rates and Limits for 2026 – KOM’s article discusses ESB 6347, including the return to 10%–20% estate tax rates and changes to exclusion amounts.
Millionaires Tax / Income Tax
Washington Enacts New “Millionaires Tax” – KOM’s article covers ESSB 6346, including the 9.90% tax rate, January 1, 2028 start date, and the $1 million standard deduction framework.