Because Washington has no personal income tax, the state leans on excise taxes to fund most of its operations. Washington state excise taxes reach retail sales, real estate transfers, vehicle purchases, fuel, alcohol, tobacco, cannabis, and business gross receipts, with rates that vary widely by category and several notable changes taking effect in 2025 and 2026.
Sales and Use Tax
The statewide retail sales tax rate is 6.5% under RCW 82.08.020.1Washington State Legislature. Washington Code RCW 82.08.020 – Tax Imposed, Retail Sales, Retail Car Rental Cities and counties add their own local rates on top, and the combined rate reaches as high as 10.6% in some jurisdictions.2Washington Department of Revenue. Local Sales and Use Tax Rate Table What you actually pay depends on where the transaction happens, and the Department of Revenue publishes a lookup tool for any address.3Washington Department of Revenue. Sales and Use Tax Rates
The tax applies to tangible goods, digital goods, and a growing list of services. As of October 1, 2025, ESSB 5814 pulled several categories into retail sales tax for the first time, including information technology services, custom website development, advertising services, live presentations, and temporary staffing.4Washington Department of Revenue. Services Newly Subject to Retail Sales Tax
Use tax, imposed under RCW 82.12, catches purchases made outside Washington when no sales tax was collected or when the tax paid was less than Washington’s combined rate. The use tax rate mirrors the sales tax rate that would have applied locally. Online orders from sellers who don’t collect Washington tax are the most common trigger, and the tax gets reported on your return.
Real Estate Excise Tax
When real property changes hands, Washington charges a Real Estate Excise Tax on the sale price. The seller typically pays at closing. The state uses graduated brackets, so higher-priced sales get taxed at steeper rates only on the portion above each threshold:5Washington Department of Revenue. Real Estate Excise Tax
- $525,000 or less: 1.10%
- $525,000.01 to $1,525,000: 1.28%
- $1,525,000.01 to $3,025,000: 2.75%
- Over $3,025,000: 3.00%
These thresholds took effect January 1, 2023. A $600,000 sale, for example, gets 1.10% on the first $525,000 and 1.28% on the remaining $75,000. The taxable amount includes any debt the buyer assumes.
Counties and cities layer their own REET on top. Under RCW 82.46.010, a jurisdiction can impose up to 0.25% of the selling price, with another 0.25% authorized for capital projects in a comprehensive plan.6Washington State Legislature. Washington Code RCW 82.46.010 – Tax on Sale of Real Property Authorized Some areas also assess REET for affordable housing and conservation, so the local add-on varies by location.
REET also applies to controlling interest transfers. If 50% or more of the ownership of an entity that holds real property changes hands within a 36-month window, Washington treats the shift as a taxable sale of the underlying real estate.7Washington State Legislature. Washington Code 82.45.060 – Tax on Sale of Real Property
Vehicle-Related Excise Taxes
A car purchase in Washington triggers the combined state and local sales tax, whether the sale is through a dealer or private party. An additional 0.5% of the selling price applies to every retail motor vehicle sale (rental cars excluded) and funds the state’s multimodal transportation account.1Washington State Legislature. Washington Code RCW 82.08.020 – Tax Imposed, Retail Sales, Retail Car Rental
Starting January 1, 2026, an 8% luxury vehicle tax hits the portion of a vehicle’s selling price above $100,000. On a $130,000 purchase, the 8% applies only to the $30,000 over the threshold, adding $2,400. Leases are subject to the same rule based on the fair market value portion above $100,000.8Washington Department of Revenue. New Luxury Motor Vehicle Tax
Registering a vehicle in a Regional Transit Authority zone, such as the Sound Transit district covering parts of King, Pierce, and Snohomish counties, may add an RTA motor vehicle excise tax. This voter-approved tax is calculated on the depreciated value and applies to passenger vehicles, motorcycles, and certain commercial vehicles at 6,000 pounds or less.9Legal Information Institute. Washington Administrative Code 308-57-110 – RTA Excise Tax Fee Schedule Electric and hybrid vehicles capable of traveling at least 30 miles on battery power owe extra annual registration fees, including a $150 electric vehicle fee and a $75 transportation electrification fee.
Fuel Tax
Washington’s state gas tax is roughly 59 cents per gallon and stacks on top of the 18.4-cent federal excise tax, for a combined burden of about 77 cents per gallon before the price of the fuel itself. Diesel carries a federal rate of 24.4 cents per gallon. Fuel taxes are built into the pump price rather than added at the register, and they fund road construction, maintenance, and transportation infrastructure.
Alcohol, Tobacco, and Cannabis Taxes
Spirits, Beer, and Wine
Distilled spirits carry the heaviest alcohol taxation. Retail purchases are hit with a spirits sales tax of 20.5% plus a spirits liter tax of $3.7708 per liter. Bars and restaurants pay reduced rates on their wholesale purchases: 13.7% and $2.4408 per liter.10Washington Department of Revenue. Spirits Sales Regular sales tax applies on top. Beer and wine carry lower excise rates and are also subject to standard sales tax.
Cigarettes and Other Tobacco
Cigarettes are taxed at $3.03 per pack, or $30.25 per carton, with the tax owed when product enters the state and passed through to the shelf price. Other nicotine and tobacco products, including vaping products, are taxed at 95% of the selling price. The federal cigarette excise tax of $1.01 per pack applies on top.
Cannabis
Recreational cannabis carries a 37% excise tax collected at the point of sale. This tax replaces the standard sales tax rather than stacking with it. Qualifying patients with a recognition card are exempt when buying medical cannabis.
Business and Occupation Tax
The Business and Occupation tax is Washington’s main business-level excise, and it works on gross receipts rather than profit. A business with $1 million in revenue and no profit still owes B&O tax on the full $1 million. Wages, rent, and cost of goods sold are not deductible. Rates track what the business does:11Washington Department of Revenue. Business and Occupation Tax Classifications
- Retailing: 0.471%
- Manufacturing and wholesaling: 0.484%
- Services with prior-year income under $1 million: 1.5%
- Services with prior-year income of $1 million to $4,999,999: 1.75%
- Services with prior-year income of $5 million or more: 2.1%
Small percentages, but applied to gross receipts. A service business grossing $2 million pays 1.75% on the entire amount, or $35,000, regardless of profit. Specialized classifications exist for timber, aerospace, hospitals, radio broadcasting, and other industries, each with its own rate.
Surcharges on Large Businesses
Two surcharges sit above the standard rates for the largest firms. Beginning January 1, 2026, businesses with Washington taxable income of $250 million or more in a calendar year owe an added 0.5% on certain income above that threshold. Manufacturing income, prescription drug and food sales, and several other categories are excluded. The surcharge is scheduled to expire December 31, 2029.12Washington Department of Revenue. Surcharge on High Grossing Businesses
The advanced computing surcharge targets a narrower group: members of affiliated corporate groups with worldwide gross revenue over $25 billion where at least one member engages in advanced computing. Beginning January 1, 2026, those businesses owe 7.5% on their service-related B&O taxable income, capped at $75 million per year across the affiliated group.13Washington Department of Revenue. Select Advanced Computing Businesses
Exemptions and Credits
Sales and Use Tax
Most grocery staples are exempt, but prepared foods, restaurant meals, and alcohol are not. Prescription drugs are exempt. Sales to qualifying nonprofits and government agencies may be exempt depending on the purchase and the organization’s status.
Real Estate Excise Tax
Several transfers avoid REET altogether. Gifts where no money changes hands generally qualify. So do transfers by inheritance or will, transfers between spouses (including those tied to divorce or community property), and deed corrections. Each exemption requires the proper documentation filed with the county at closing.
B&O Small Business Credit
Small businesses with limited B&O liability can claim a credit that reduces or eliminates their tax. The credit thresholds depend on whether the business earns most of its income from services:14Washington Department of Revenue. Credits
- Primarily service businesses (50% or more of income from services): the credit applies when total B&O tax liability falls below $3,840 per year, $960 quarterly, or $320 monthly.
- Other businesses (less than 50% from services): the credit applies when total B&O tax liability falls below $1,320 per year, $330 quarterly, or $110 monthly.
Businesses below the thresholds may owe little or nothing after the credit is applied. The credit phases out as liability rises toward the cap, so businesses slightly above the minimum still receive partial relief.