A new state sales tax expansion that went into effect on October 1, 2025, is creating significant financial and administrative challenges for nonprofit organizations across Washington, including those in King County and the South Sound. The new law subjects many previously exempt services to sales tax, directly impacting fundraising efforts and operational budgets.
The new measure expands the state sales tax of up to 10% to cover a wide range of services crucial to nonprofit operations. Services now taxable include advertising, IT support, auctioneers, and live presentations. This change means that nonprofits that depend on fundraising events and campaigns are facing higher costs. For instance, hiring an auctioneer for a charity gala or launching a digital ad campaign for a fundraising drive now includes sales tax, which ultimately reduces the net funds raised for their causes.
The tax also extends to cultural and educational programming, with classes, seminars, and workshops now being taxed, even if offered online. However, some activities like performances, readings, and one-on-one coaching remain exempt from the new tax.
In addition to the financial strain, nonprofits are facing an increased administrative burden as they work to comply with the new regulations. Organizations must update their contracts, invoices, and accounting systems. The Department of Revenue is advising caution, recommending that nonprofits pay the taxes for now and seek reimbursement later if they believe an exemption might apply. The department is still finalizing its rules and encourages organizations to monitor updates.
While many nonprofits are concerned about the impact on their budgets, some see the bigger picture. Robbin Rae Peterson, Development Director for the West Seattle Food Bank, stated that the effect on her organization's fundraising would likely be minimal.
“This hasn't been on our radar in this way," Peterson said. "We have been in support of progressive revenue efforts by the state and city to support social services that may otherwise have reduced funding. Being taxed on the very little paid advertising we do, or classes we attend, won't really have an impact on us. But comparatively, maintaining funding levels at the state and city levels for programs addressing food and housing security very much impact us in a positive way".
As nonprofits navigate these changes, they are advised to review all service contracts signed or paid after the October 1 deadline and to budget for reduced margins on fundraising and outreach efforts to account for the new tax on services
