November Newsletter
As of October 1, 2025: Advertising Services are Taxable in Washington State
Washington businesses that provide advertising services will need to start collecting retail sales tax and reporting Business & Occupation (B&O) tax under the Retailing classification. This applies to both digital and traditional advertising work.
What’s Included: Services like graphic design, ad placement, campaign strategy, online referrals, search engine marketing, and ad performance tracking are all considered taxable advertising services.
What’s Not Included: This change does not apply to services like web hosting, domain registration, radio/TV broadcasting, print publishing, or out-of-home ads such as billboards, transit displays, or event signage.
How to Report: If you provide advertising services, you’ll need to report your income under Retailing B&O, Retail Sales Tax, and Local Sales Tax on your excise tax return. Update your tax classifications through your My DOR account.
Important Note: If you’ve been classified as “active non-reporting,” this change means you may need to start filing excise tax returns. Contact the Department of Revenue at 360-705-6705 to update your account.
Transitional Guidance for Car Loan Interest Reporting
The U.S. Department of the Treasury and IRS have released Notice 2025-57, providing transitional relief for lenders affected by new reporting requirements under the One, Big, Beautiful Bill (OBBB). Beginning in 2025, lenders must report the total amount of car loan interest received on qualified passenger vehicles such as cars, trucks, SUVs, and motorcycles assembled in the U.S. For this first year, the IRS will not impose penalties as long as lenders make this information available to borrowers, whether through online portals, monthly statements, or annual reports.
New Tax Deduction for Borrowers:
The OBBB also introduces a new tax benefit allowing individuals to deduct interest paid on qualified car loans taken out after December 31, 2024, and before January 1, 2029, for vehicles purchased for personal use. Businesses receiving $600 or more in car loan interest from an individual must comply with these new reporting rules. This transitional guidance aims to make implementation smoother for lenders while ensuring taxpayers can take full advantage of the new deduction.
IRS to Phase Out Paper Refund Checks by September 2025
The IRS, in coordination with the U.S. Department of the Treasury, has announced that paper tax refund checks for individual taxpayers will be phased out starting September 30, 2025, as part of a nationwide move toward electronic payments. This change, required under Executive Order 14247, aims to protect taxpayers, speed up refunds, and reduce administrative costs. Paper checks are over 16 times more likely to be lost, stolen, or delayed compared to electronic deposits, and direct deposit refunds typically reach taxpayers in less than 21 days, far faster than mailed checks.
What Taxpayers Should Know:
Filing procedures will remain the same, but refunds will increasingly be delivered through direct deposit or other secure electronic methods. For individuals without bank accounts, options such as prepaid debit cards and digital wallets will be available. The IRS encourages taxpayers to confirm their banking information or open a free or low-cost account ahead of the change. Additional guidance for 2025 tax returns will be issued before the 2026 filing season, and updates will be available at IRS.gov/modernpayments
AICPA Requests IRS Guidance on New Tip and Overtime Deductions
The American Institute of CPAs (AICPA) has urged the IRS and U.S. Treasury to issue clear guidance on how businesses and individuals should report and substantiate deductions for qualified tips and overtime pay under the new One Big Beautiful Bill Act (H.R. 1, P.L. 119-21). These deductions apply for tax years 2025 through 2028, but the IRS has stated it will not update key forms, such as Form W-2 or Form 1099-NEC, to include fields for this information in 2025. This leaves employers, payers, and tax professionals uncertain about how to comply with the reporting requirements.
Proposed Safe Harbors for Businesses and Taxpayers:
To address the confusion, the AICPA has recommended that the IRS allow temporary safe harbors for the 2025 tax year. These would permit businesses to use alternative reporting methods, such as pay stubs, employer letters, or worker logs, to document qualified tips and overtime pay. The AICPA also requested examples of acceptable documentation to help ensure consistent compliance and recordkeeping. The organization emphasized that prompt clarification will be critical for both businesses and preparers as they prepare for the 2025 filing season.
