Sept. 19, 2025
State B&O, Sales Tax Increases Go Into Effect Oct. 1
Against the backdrop of an approximately $15 billion budget deficit, Democratic state legislators approved around $10 billion in tax increases in the final days of the 2025 legislative session in order to reach a budget deal. Most notably for the physician community, bills were approved to increase the state's business and occupation tax and apply sales tax to additional services, with many of the rate increases taking effect on Oct. 1.
The WSMA aggressively opposed these tax increases in concert with the physician community, with WSMA members sending in more than 1,000 messages to legislators in opposition to the B&O tax increase. We stressed that the tax increases will have the effect of decreasing patient access to care, increasing the cost of care, and fueling more consolidation into larger health systems-all running counter to what we consistently hear as concerns of legislators.
Mitigating the impact of these tax increases will be a top priority of the WSMA in the 2026 legislative session that begins in January. In the meantime, below are summaries of the two bills and additional resources from the Department of Revenue.
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House Bill 2081 / B&O tax increase
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Enacts B&O tax increases for most industries as well as a surcharge on companies that gross over $250 million annually.
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For physician organizations and other "service" category businesses that gross more than $5 million annually, rates increase from 1.75% to 2.1% on Oct. 1.
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All businesses that gross more than $250 million annually are subject to an additional 0.5% surcharge effective Jan. 1, 2026, through Dec. 31, 2029.
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Senate Bill 5814 / Sales tax on services
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Applies state retail sales tax to additional services, effective Oct. 1.
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For the physician community, below are the most relevant service categories where sales tax is newly applied, with links (where available) to interim guidance statements from the Department of Revenue: