A limited-time chance to reduce penalty exposure for newly taxable services
Updated: March 03, 2026
Starting Oct. 1, 2025, Washington expanded retail sales tax (and retailing B&O) to several service categories under ESSB 5814. For a plain-English overview of what changed, see DOR’s Services newly subject to retail sales tax page. To help businesses transition and correct prior-period errors, DOR also launched the ESSB 5814 Penalty Relief Program. If your business sells services, buys services, or bundles services with other deliverables, this program may be worth evaluating—especially if you weren’t collecting sales tax or accruing use tax (if applicable) on services that are now treated as retail sales.
What services are in scope?
ESSB 5814 touches multiple service categories. DOR’s main page above includes a summary list, and DOR has issued multiple interim guidance statements that provide category-by-category detail.
You can browse DOR’s Interim guidance statements for specific guidance on topics such as advertising services, information technology services, custom software, custom website development, temporary staffing services, and live presentations.
Common categories that businesses are encountering in practice include:
- Advertising services
- Information technology services
- Custom software and customization of prewritten software
- Custom website development services
- Temporary staffing services
- Live presentations
- Investigation, security, security monitoring, and armored car services (in certain contexts)
What the Penalty Relief Program does (and does not do)
In general, DOR’s penalty relief program is aimed at businesses that voluntarily come forward to report and pay taxes due because of the ESSB 5814 changes. Key program points (as described by DOR):
- Penalty relief applies to qualifying uncollected retail sales tax and unpaid use tax tied to ESSB 5814 changes, for reporting periods Oct. 1, 2025 through Dec. 31, 2026.
- Applications generally must be submitted by Sept. 30, 2027.
- Relief is for penalties only—the underlying tax remains due, and interest may still apply.
- Certain penalty types (for example, evasion/negligence/tax avoidance penalties) are not eligible under the program.
For the full eligibility details and definitions, see the ESSB 5814 Penalty Relief Program page.
How to apply
DOR requires applications to be submitted through its online voluntary disclosure application process. At a practical level, the workflow is typically:
- Submit the online application and indicate you are requesting ESSB 5814 penalty relief (if prompted).
- If approved, sign and return DOR’s penalty relief agreement by the stated deadline.
- Work with the assigned examiner to quantify liability and provide requested records.
- Review DOR’s draft assessment, then confirm the final assessment and pay by the due date.
Special issue: “existing contracts” signed before Oct. 1, 2025
Contract timing and contract changes can matter as much as the service category. DOR issued interim guidance addressing how it views contracts executed before Oct. 1, 2025 that continue into the post‑Oct. 1 period. See DOR’s interim guidance statement on existing contracts for definitions, transitional rules, and examples.
If you have long-term agreements, renewals, amendments, change orders, or scope expansions, those details can affect when retail sales tax collection should begin and how risk should be quantified for voluntary disclosure purposes.
How KOM Consulting can help
Most clients need a clean, defensible approach that is practical to implement. Typical support includes:
- Service mapping: match real-world offerings to DOR’s service categories and interim guidance.
- Contract triage: identify “existing contract” candidates, test amendments/change orders, and align invoicing language.
- Exposure quantification: estimate uncollected sales tax and/or accrued use tax for the covered periods.
- Voluntary disclosure support: prepare the application narrative and support documentation, and help manage examiner questions.
- Forward-looking compliance: design a repeatable billing and taxability decision process for 2026 and beyond.
If you would like help evaluating eligibility or estimating exposure, contact us and we can scope the work based on your service lines, contract terms, and reporting history.
Disclaimer: This article is for general informational purposes only and is not legal or tax advice for your specific facts.