Navigating the New Digital Services Tax Law — SB5814
Washington’s creative and advertising community came together once again on October 8 for AAF Seattle’s virtual forum, Navigating the New Digital Services Tax Law — SB 5814, a timely and urgently needed conversation about the state’s sweeping new tax requirements for advertising and digital services.
Building on the momentum of August’s Founders Roundtable, this session broadened the audience, drawing agency leaders, production teams, freelancers, strategists, in-house marketers, and students. The turnout reflected a community still grappling with how to interpret and implement the law, and hungry for clarity, guidance, and a sense of solidarity.
What unfolded was an informative, candid, and at times sobering discussion featuring the Washington State Department of Revenue (DOR) and tax attorneys from Ballard Spahr, who together provided practical insights, examples, and warnings about what lies ahead for businesses navigating SB 5814.
A Community Seeking Answers
Before the program began, a series of live polls offered a snapshot of the room and painted a clear picture of where people stand.
When asked how prepared attendees felt for compliance, the majority said they had taken only “small steps,” others admitted they don’t know where to start, and only a handful said they felt fully ready. Several attendees reported that the law has already caused them to lose business, echoing the concerns expressed during the August roundtable.
One of the most striking responses came from the advocacy poll, where many participants said they would like to contact their legislators but don’t know how — and several admitted the thought hadn’t yet crossed their minds. This reinforced a theme that ran throughout the event: the need for collective action, shared resources, and clear on-ramps for civic engagement. By the final poll, every attendee asked for more forums like this one.
Setting the Stage
AAF Seattle President Valentina Gómez-Bravo opened the event by reinforcing the organization's mission: to educate, advocate, and unify the region’s creative industries. She grounded the conversation in both urgency and optimism, noting the community’s strong response to the first roundtable and previewing upcoming AAF Seattle events and advocacy efforts.
Government Affairs Director Thomas Ackels then framed the session: this was not simply an informational meeting, but an opportunity to understand, clarify, and prepare for the future. With the law now in effect, the focus had shifted from speculation to implementation — and to helping businesses of all sizes navigate the complexities ahead.
The panel featured representatives from the Washington State Department of Revenue, including Lalo Mendoza from the TPS Education & Outreach Team and tax law expert Darlene Warner, alongside Aaron Johnson and Brett Durbin, partners at Ballard Spahr LLP who co-lead the firm’s State and Local Tax team. Each panelist brought a unique perspective: the Department of Revenue provided insights focused on enforcement and interpretation of tax regulations, while Ballard Spahr contributed legal strategies and cautionary guidance, creating a well-rounded discussion on state and local tax issues.
What the Law Actually Does, and What It Means
The DOR led the group through an overview of the law, starting with the basics: as of October 1, 2025, many advertising and digital services are newly subject to retail sales tax and retail Business and Occupation (B&O) tax.
This includes digital advertising, agency services, creative and pre-production services, custom software, website development, and IT and digital services. Several longstanding exemptions were repealed, including the exemption for newspaper advertising, meaning that even legacy media categories will experience shifts in how they handle sales tax.
DOR repeated one theme throughout the session: They cannot change the law — they can only interpret and enforce it.
This reality shaped the tone of the morning: practical guidance within nonnegotiable constraints.
The Heart of the Confusion: Sourcing
The most complex part of the law — and the area that drew the most questions — is sourcing, or determining where the buyer “receives” the service.
DOR explained:
Pre-dissemination services (e.g., creative development) are received where the client first uses the deliverable.
Dissemination services (e.g., placing ads) are sourced where the advertisement appears to the intended audience.
Real-world examples underscored the complexities involved in sourcing decisions, particularly when national campaigns, multi-state companies, creative work produced in Seattle for nonlocal clients, and work distributed across digital platforms blur the lines of client location. This situation places the burden on businesses to justify, document, and allocate appropriately. The Department of Revenue (DOR) emphasized that reasonable methods for allocation are allowed, documentation is essential, and businesses may request binding rulings when interpretation is unclear. Additionally, a “grace period” exists for certain pre-existing contracts to provide some leeway during this transition.
Still, the overarching message was clear: the law is difficult to apply, and businesses must prepare for that.
Legal Perspectives and Warnings
Ballard Spahr attorneys expanded on the challenges businesses face by highlighting several critical issues, including the risks associated with incorrect sourcing, the steep penalties for misuse of reseller permits, and the complications arising from “bundled” transactions. They also addressed conflicting interpretations between statute and practice, potential First Amendment concerns, and the heightened risk of audits, particularly as the Department of Revenue responds to increased demand for rulings. Additionally, they noted the possibility that future regulations could extend into related digital areas. Their guidance was clear and practical: businesses must thoroughly document all transactions, avoid overly broad use of reseller permits, rely on well-crafted contracts to clarify sourcing, and ensure that taxable and nontaxable services are clearly separated.
A System That’s Straining Small Businesses
A recurring theme of both the DOR presentation and legal commentary was the disproportionate impact of the law on small- to mid-sized businesses. All participants voiced concerns about the administrative burden, loss of competitiveness with out-of-state firms, client confusion, rate increases that make Washington agencies appear 10% more expensive overnight, inconsistent application for digital campaigns, difficulty tracking service location, and the increased labor needed for accounting and documentation.
We closed the conversation by reinforcing that the community’s perspectives matter and that now is the moment to reach out to legislators, share real-world impact, and advocate for solutions that support Washington’s creative economy.
A Call for Ongoing Conversation
The strongest signal of the day came at the end when every attendee asked for more forums like this one. At AAF Seattle we are committed to:
Continuing educational events
Sharing updated resources as the DOR releases more guidance
Providing templates for outreach
Offering advocacy pathways for those unsure of where to begin
Keeping the conversation going as the law evolves
Resources from the Event
Take Part in the Work
If you want to help shape how Washington’s creative sector responds to SB 5814, we invite you to join AAF Seattle’s Government Affairs & Advocacy Committee, a group working year-round to support, protect, and elevate the region’s creative community.
