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Tax Law

Washington considers digital advertising tax

Washington lawmakers may soon begin debate on a digital advertising tax, prompted by a draft copy of a yet-to-be-filed bill. Washington currently applies its business and occupation tax to digital advertising services under the service and other activities classification (1.5%). This bill would instead subject digital advertising services to the business and occupation tax retailing classification (0.471%) and sales tax (6.5% state rate plus local tax) as a digital automated service. Borrowing from current B&O tax language, the bill defines “digital advertising services” to include online referrals, search engine marketing and lead generation optimization, web campaign planning, the acquisition of advertising space in the internet media, and the monitoring and evaluation of website traffic for purposes of determining the effectiveness of an advertising campaign and excludes web hosting services and domain name registration.

Legislative committees are meeting to discuss new business during the week of November 30, and Washington’s legislature will convene its 2021 session on January 11.