By John Somerlott, Legislative Assistant, Greater Spokane Inc.
Talk. Vote. Sign. Law.
If you wanted to distill the legislative process into four words, these might do it. The talking, voting, and signing wrapped up just one week ago. On May 20th, the Governor had his final day to sign bills into law and make his veto decisions. The Governor wasn’t the only one busy on the 20th, though. Greater Spokane Inc. hosted some of our local elected officials for a panel discussion on this difficult legislative session.
Senator Marcus Riccelli, Representative Timm Ormsby, Representative Suzanne Schmidt, and Senator Leonard Christian participated in the morning discussion led by GSI State lobbyist Jim Hedrick. The panel covered a range of topics, from the state budget to the Governor’s first term. While the lawmakers answered questions, they could only speculate about the Governor’s impending decisions on budget and revenue bills. Just a few hours later, those decisions were made public – giving us clarity on what is officially set to become law in the months ahead.
What major business impacts could come from Washington’s legislative session?
Some good news & improvements
The Governor signed a battery of bills that will hopefully expand housing in Washington state. These included making condo construction easier (HB 1403) and streamlining the process of lot splitting (HB 1096). While we won’t know the full impact of these kinds of bills for some time, it is important to celebrate good legislation when it happens. Housing affordability is a major challenge that needs to be addressed to maintain a healthy workforce population.
The state took meaningful steps to make working in Washington easier for some folks with specific licenses. The Respiratory Care Interstate Compact (HB 1114) and the Cosmetology Compact (HB 1023) were both passed. This kind of legislation is incredibly important on its own, but especially when you consider the presence of Fairchild Air Force Base. Military spouse underemployment (22%) and unemployment rates are high. This is due in part to limits on the transferability of professional licenses. Interstate compact agreements help address this issue by enabling license holders, including service members and their families, to participate more fully and better support themselves.
Spokane also received funding from the capital budget (SB 5195) for requests that will go to developing regional resources like health care facilities, education centers, and transportation improvements. Spokane was awarded over $50,000,000 for these kinds of projects
The new revenue
The most pressing question of the legislative session was how the state would get out of its significant deficit, and now we know… mostly taxes. While the state made significant cuts to major programs and services like education and the Department of Children, Youth, and Family, taxes are doing a significant amount of the legwork. The following are the changes that will have the greatest impact on businesses in the months and years ahead
Sales tax on services (SB 5814)
This may be the largest tax change of all. Beginning October 1st of this year (2025), a significant number of businesses that were previously subject to the Service & Other Activities B&O tax are now required to charge sales tax. This applies to everything from software and web services to security and advertising services. The tax is set to affect “services primarily involving the application of human effort by the seller.” The only exclusions to this were temporary staffing services by hospitals and telehealth services.
Business & occupation tax (SB 2081 & SB 5814)
Beginning January 2027, rates are increasing to .5 percent for retailing, wholesaling, manufacturing, and several other specific areas. Additionally, businesses with gross receipts over $5 million will have increased rates on each dollar over the $5 million threshold. The rate will be 2.1 percent on each dollar over the $5 million amount; it was previously 1.75 percent. There was also an expansion to apply B&O taxes to storage unit rental income that begins April of 2026.
For additional details on Washington State’s tax changes, check out this article from Moss Adams.
Transportation
The headline: North Spokane Corridor gets funded with an increased fuel tax.
Beginning July 1st, taxes on gas and diesel will increase by 6 cents. Diesel will increase a total of 12 cents by 2028. The total fuel tax will also be increased 2 percent yearly to account for inflation.
Additional costs on energy always have meaningful impacts to business and consumers as it becomes more expensive to operate a business and transport people for work and goods for sale.
But the good news – the North Spokane Corridor timeline and projects stayed in the budget and mostly on-time. This is the ONLY significant project East of the cascades.
Where do we go from here?
Whether directly or indirectly, nearly every business in Washington will feel the impact of these tax and revenue changes. From sales tax on services to energy-related costs, these shifts affect how we operate, what we charge, and how competitive we remain.
That’s why engaging with other businesses and community partners is essential. GSI is committed to advocating on behalf of our region – making your voices heard and pushing back on policies that could harm local businesses. We want to build our advocacy in collaboration with you – businesses of all sizes across Spokane – so we can move forward with unity and purpose.
Even though the 2025 legislative session has ended, our work hasn’t. GSI is already planning next steps: analyzing impacts, shaping strategy for the next session, and staying connected with our members to understand how these changes are being felt across the region.
We want to hear from you! What is your business dealing with? Whether it is new taxes, regulations, tariffs, or anything else, reach out to us at [email protected] with your story or what you want to know more about.
