Washington State 2026 Session: Legislature Repeals and Rolls Back Certain Recently Enacted Taxes

Following adjournment of the 2026 Washington State legislative session on March 12, 2026, Governor Bob Ferguson signed into law several bills that repealed or rolled back a variety of taxes enacted only one year earlier. This alert summarizes the key tax repeals and rollbacks from the 2026 session, and explains that some of those repeals and rollbacks do not take place immediately but others are retroactive.

Promised Rollback of Sales Tax on Services, Effective January 1, 2029 (ESSB 6346, Undoing ESSB 5814)

The 2026 legislature addressed the controversial expansion of Washington's retail sales tax to numerous service categories that went into effect only months earlier.

In May 2025, the legislature enacted Engrossed Substitute Senate Bill 5814, which expanded the State's retail sales tax to a broad range of services that had never previously been subject to sales tax. Newly taxable services included advertising services, live presentations, information technology support services, custom website development services, custom software and customization of prewritten software, investigation and security services, armored car services, and temporary staffing services.

Beginning January 1, 2029, ESSB 6346 repeals the sales tax expansion to numerous service categories. Notably, however, the legislation does not repeal the sales tax on advertising services.

ESSB 6346 also provides more immediate sales tax relief for certain taxpayers. Specifically, beginning July 1, 2026, K-12 public schools, school districts, and educational service districts are exempt from paying sales tax on the newly taxable services, including live presentations, temporary staffing, and security services. Live presentations by nonprofits and before- and after-school care at elementary schools were also carved out from the sales tax. Libraries were similarly exempted from sales tax on services.

Separately, the legislature passed Senate Bill 6113, a technical cleanup bill introduced at the Department of Revenue's request making a number of retroactive clarifications to the expanded sales taxes imposed by ESSB 5814. These clarifications include:

• Refining the definitions of investigation and security services;
• Adding exemptions for live presentations at preschools, youth camps, churches, and for music performances and instruction; and
• Establishing a transition grace period for existing contracts through March 31, 2026.

These retroactive clarifications are effective both prospectively and retroactively as of October 1, 2025.

Repeal of the Luxury Aircraft Tax (HB 2711, Repealing SB 5801)

House Bill 2711 repealed the 10% luxury tax on private and business aviation aircraft that had been set to take effect on April 1, 2026. The repealed law would have imposed a 10% tax on the sale, lease, or transfer of noncommercial aircraft valued at more than $500,000.

The 2026 legislature repealed the aircraft component of the luxury tax less than one year after its enactment in response to industry stakeholders, such as the Pacific Northwest Business Aviation Association, raising concerns that it was causing aircraft to relocate out of Washington and harming aviation businesses across the State.¹

Now, effective June 11, 2026, in place of the luxury aircraft tax, HB 2711 modifies aircraft-related taxes and fees in two specific ways:

1. Increases the State's aviation fuel tax from 18 cents per gallon to 25 cents per gallon; and
2. Raises annual aircraft registration fees from $15 to $30, with automatic 2% annual increases beginning in 2028.

Even though the luxury aircraft tax was repealed, the 8% luxury tax on vehicles and 0.5% luxury tax on recreational watercraft vessels both remain in effect. Notably, however, HB 2711 modifies the application of Washington State’s use tax on such items. Specifically, the use tax base for both luxury vehicles and recreational vessels now aligns with the corresponding sales tax bases, prohibiting the value of any trade-in from being deducted from the measure of tax. Further, when a luxury vehicle is leased, requiring periodic payments, the luxury tax may be remitted in equal periodic payments over the term of the lease. Exemptions available under the general retail sales and use tax to both enrolled tribal members and nonresidents now apply to the luxury vehicle tax.

Rollback of Estate Tax Rate Increases (SB 6347, Undoing SB 5813)

The legislature also passed Senate Bill 6347 restoring Washington State's estate tax rate structure to its pre-2025 levels, effectively reversing the significant rate increases enacted in 2025 by SB 5813.

Enacted less than a year ago, SB 5813 had raised the State's top estate tax rate to 35%, making it the highest in the nation. Now, under SB 6347, for individuals who die after July 1, 2026, the rates revert to a range of 10% to 20%, depending on the value of the decedent's Washington taxable estate, with the maximum rate kicking in at $9,000,000.

SB 6347 maintains the increased estate tax exemption of $3,000,000 per individual for decedents dying on or after July 1, 2026 from SB 5813 last year. However, the 2026 law effectively freezes the exemption threshold at that level by reverting the inflation index to an index that no longer exists (the former Seattle-Tacoma-Bremerton index).

Elimination of Data Center Sales Tax Exemption (SB 6231)

In contrast to the foregoing taxpayer-friendly repeals, the legislature also eliminated a longstanding tax preference. Senate Bill 6231 repeals the retail sales and use tax exemption for replacement and refurbished equipment for data centers. Under prior law, data center operators in most Washington State counties were exempt from sales tax on purchases of both new and replacement server equipment. SB 6231 eliminated the exemption for replacement and refurbished equipment beginning July 1, 2026, while leaving in place the exemption for new equipment at new data centers.

Broader Context: The Evolving Washington State Tax Environment

These repeals and rollbacks occurred against the backdrop of a rapidly shifting Washington State tax environment. The same 2026 session also saw passage of a new state income tax on individuals with income exceeding $1,000,000 (SB 6346, the so-called "millionaire's tax"), which is expected to face significant legal challenges before it is scheduled to take effect January 1, 2028. The State had also adopted a capital gains tax in 2021, with a rate increase enacted in 2025 for gains over $1,000,000. The interplay of these new taxes with the simultaneous rollback of other recently enacted levies reflects the legislature's ongoing effort to recalibrate Washington's tax structure.

Summary of Recently Enacted Taxes Repealed or Rolled Back

This client alert is intended for general informational purposes only and does not constitute legal advice. Clients should consult with counsel regarding the specific application of these legislative changes to their circumstances, particularly given the possibility of further legal challenges and regulatory developments.

The Ballard Spahr State and Local Tax Team can help with navigating Washington State’s ever-changing tax landscape, and will continue to monitor these matters and provide updates as warranted.

1: See generally, Governor Signs Washington State Luxury Tax Repeal, Pacific Northwest Business Aviation Association (April 1, 2026) ( "[w]hen SB 5801 was passed last year, establishing a 10% tax on the original value of aircraft owned, leased, or purchased in the state, aircraft began moving out of Washington. Service providers began losing customers. Ultimately, general aviation in Washington shrunk significantly over the past year."), available at https://www.ainonline.com/aviation-news/business-aviation/2026-04-01/governor-signs-washington-state-luxury-tax-repeal.

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