Online sellers face another cost that takes a bite out of their margins. Amazon began charging state sales tax on seller ads on October 1, 2025. It applies to sellers located in a single state for now, but like other legislation, lawmakers seeking to grow state revenue will likely consider passing similar laws of their own.
In a help page, Amazon said it was required to collect sales tax by the state of Washington (it isn’t clear if other marketplaces have begun complying with the law; eBay recently took its advertising blog offline):
Washington State Sales Tax Requirements for Amazon Ads
On May 20, 2025, Washington Senate Bill 5814 was signed by Governor Bob Ferguson, which expands the existing sales tax to include advertising services. The legislation specifically includes online advertising services as taxable retail sales and encompasses all aspects of online advertising production and placement services.
The legislation goes into effect on October 1, 2025, which means customers with billing addresses in Washington will see sales tax included on their invoices for advertising spend with Amazon once the legislation is effective, including all Display and Sponsored Ads products.
Amazon was citing a law explained on Washington’s Department of Revenue website as follows:
The 2025 Washington State Legislature passed Engrossed Substitute Senate Bill (ESSB) 5814, which added new business activities to the definition of retail sales. As a result, businesses will be required to begin collecting sales tax on the following services starting Oct. 1, 2025:
Advertising services.
Live presentations.
Information technology services.
Custom website development services.
Investigation, security, and armored car services.
Temporary staffing services.
Sales of custom software and customization of prewritten software.
ESSB 5814 also removes the following exclusions from the definition of digital automated services (DAS):
Services involving primarily human effort.
Live presentations.
Advertising services.
Data processing services.
The bill also created a new exclusion to DAS for “telehealth” and “telemedicine services.”
Tax service Avalara said the new Washington State sales-tax rules also apply to such things as custom website development services – another hit to online sellers. (Avalara defines website development service as meaning “the design, development, and support of a website provided by a website developer to a customer.”
Note that while most sellers technically have a choice in whether to advertise, Etsy forces sellers to advertise once they reach a certain sales threshold.
Geekwire reported on how the new law will impact Washington businesses and said it’s being met with confusion and consternation by advertisers and tax consultants.
Amazon sellers discussed the new law in a post on the SellersAskSellers.com forum, where one seller published a letter Amazon had sent to sellers on September 22, 2025.