The Washington Department of Revenue (DOR) released an Interim Guidance Statement (IGS) on Advertising Services implementing Engrossed Substitute Senate Bill (ESSB) 5814 ahead of the October 1, 2025, effective date. In previous posts, we addressed the passage of ESSB 5814 and the sourcing rules.
The Advertising Services IGS is part of a broader rollout of interim guidance DOR is publishing before the effective date. Previous IGSs include guidance on Custom Website Development; Digital Automated Services (DAS) Exclusions; Information Technology Services; Live Presentations; Investigation/Security/Security Monitoring, and Armored Car Services; Temporary Staffing Services; and Existing Contracts (among others). We view this cadence as a positive sign of the tax policy team’s commitment to provide implementation detail ahead of the effective date of the new taxes.
Two categories the advertising services IGS addresses
In response to industry requests, the IGS addresses both “creative” or pre-dissemination services and “dissemination” services (i.e., advertising services involving the actual dissemination). The IGS states that it is responding to the need for clarity on both types.
Where the sale takes place
The IGS applies the destination-based sourcing statute and frames receipt as first use, guided by the Streamlined Sales and Use Tax Agreement’s concepts of where a purchaser (or donee) can first make use of the result of the service. For disseminated advertising services, including creative services bundled with dissemination, the IGS illuminates that “receipt occurs where the result of the advertising services is first used … which is the location where the advertising services are disseminated.” The IGS continues:
The location of dissemination may be indicated by, but not limited to: instructions as to where advertising will be placed for viewing, actual locations of placement, IP addresses of potential customers’ viewers of advertising, or other similar information about where the advertising is consumed.
For pre-dissemination (creative) services where the seller does not also disseminate, “receipt occurs where the purchaser reviews the advertising or related service prior to dissemination.” If the seller does not know the location of receipt at the time of charge, the IGS walks through the statutory sourcing hierarchy and cautions against “bad faith” address selection. In instances where the full address or ZIP+4 Code cannot be determined with due diligence, the use of Washington “pool codes” is permitted.
Illustrative examples highlighted in the IGS
- Disseminated advertising: Washington-only, known viewer locations (Example 1). Source to specific ZIP+4 Codes tied to impressions; where matching isn’t possible, use Washington pool codes.
- Disseminated advertising: Washington-only, viewer location unknown at payment (Example 4). Source to the purchaser’s Washington address (not an out-of-state address).
- Disseminated advertising: Multijurisdictional, prepaid, viewer location unknown at invoice (Example 5). May source to the purchaser’s address unless the parties agree by invoice time to a reasonable, consistent multijurisdictional allocation.
- Creative advertising (advisory only) (Example 7). Source to the purchaser’s review location (g., the client’s marketing office).
- Creative and disseminated advertising across Washington and Oregon (Example 8). Allocate receipts to known viewer ZIP+4 Codes; collect Washington tax on the Washington-allocated portion.
Reclassification when facts change and bundled transactions
If, after billing, the facts later show the service was used differently than initially understood (e.g., creative advertising that is ultimately provided with dissemination advertising services or placement in an excluded medium), the IGS addresses reclassifying the gross receipts from that transaction to the correct business & occupation (B&O) tax classification and adjusting retail sales tax accordingly, including refund mechanics (as applicable). For example, where the advertising services are ultimately “rendered in respect to newspapers,” the transaction is excluded from retail advertising services. In such a situation, the purchaser may be entitled to a refund of the sales tax paid and the seller may file an amended return reclassifying gross income from retailing B&O to Service & Other Activities classification (subject to apportionment) (see Example 13).
The IGS addresses bundled transactions in Example 12 (grocer advertising allowances), where in-store/print (excluded out-of-home) advertising is combined with taxable internet or printed mail advertising (yes, junk mail advertising is subject to tax) for a single nonitemized price. In that scenario, the IGS notes that the sale “may be a bundled transaction,” and directs taxpayers to RCW 82.08.190 and RCW 82.08.195 for Washington’s bundled-transaction rules.
Multiple Points of Use (MPU) for electronically transferred ads that are also DAS
The DOR explains that when retail advertising also meets the definition of DAS, it will be treated as a digital product and may be eligible for the MPU sales-tax exemption, with the purchaser apportioning use tax. Notably, “if the advertisement is disseminated to locations inside and outside of Washington through a server(s), the [DOR] will presume there is concurrent use.” For advertising specifically, “first use” for apportionment is “the location of the persons viewing or interacting with the advertisements.” Where precise viewing locations cannot be determined with due diligence, the IGS allows a reasonable estimation method (e.g., internet usage statistics) and confirms pool-code support for Washington apportionment during an interim period.
Direct Pay Permits (DPP)
Purchasers may use a direct pay permit for advertising services (if approved and eligible), allowing payment of the tax directly to DOR rather than having it collected by the seller. The IGS describes program thresholds and mechanics and cross-references DOR resources.
Resale in subcontracting chains
The IGS confirms that advertising services can be resold in certain subcontracting arrangements. A reseller permit may be presented when:
- The prime seller is contractually responsible for delivering the subcontracted services to the end customer.
- There is no intervening use of the subcontracted services. Documentation is required; subcontractors report under wholesaling B&O.
Documentation and taxpayer instructions
The DOR reiterates recordkeeping expectations (contracts/statements of work, invoices, targeting data supporting where ads are viewed/received, exemption certificates, affiliate validations) and notes that the IGS remains effective until final guidance issues, is canceled, or legislation changes.
Bottom line
The IGS gives sellers and purchasers of advertising services concrete examples on what counts as “receipt,” how to source creative vs. dissemination advertising services, and when MPU/DPP/resale mechanics apply. Kudos to DOR’s tax policy staff for getting this guidance out ahead of the October 1 effective date. We will continue tracking updates as permanent rules are released for comment.
