In May 2025, Washington State passed a law that could significantly affect how Amazon sellers and advertisers manage their budgets. On May 20, 2025, Governor Bob Ferguson signed Senate Bill 5814, expanding the state’s sales tax to cover advertising services. While at first glance this may seem like just another policy update, the reality is that it has direct financial implications for businesses running Amazon Ads out of Washington.
Beginning October 1, 2025, all Amazon Ads purchases—including Sponsored Ads and Display Ads—will be subject to Washington state sales tax if the advertiser’s billing address is based in Washington.
What the Law Means in Practice
Up until now, ad spend itself has been treated as an operating cost without direct taxation on the service. Senate Bill 5814 changes that by explicitly categorizing online advertising services as taxable retail sales. That includes not just the creation of advertising but also the placement and management of campaigns across platforms like Amazon.
For Amazon sellers with Washington-based billing addresses, this means every dollar spent on ads will carry an additional tax burden. For example, a business spending $10,000 a month on Amazon PPC could see several hundred dollars in added costs depending on the applicable local tax rate.
Who Is Affected?
This law only impacts Washington business billing address advertisers. Sellers who are not based in Washington won’t see any changes to their Amazon Ads invoices. However, non-Washington businesses without a legitimate tax exemption certificate will be automatically charged sales tax on ad expense.
Even as we wait for ultimate implementation advice from the Washington Department of Revenue, the word is out: ad expenses are on the rise for state-headquartered sellers.
Why This Matters for Amazon Sellers
This change occurs at a time when Amazon Ads are already getting more costly because of a surge in competition and higher cost-per-click (CPC) rates. Imposing a state tax over ad spending translates to Washington sellers potentially having tighter margins, particularly for intensely competitive product categories where ad budgets are already maximized.
It’s not simply a case of paying more. Sellers will need to reconsider their ad spend allocation, potentially shifting spend into their best-performing campaigns and trimming spend from lower-performing ones. For smaller sellers, this added expense could make aggressive ad tactics prohibitive.
Strategies to Respond
While the law itself cannot be avoided, sellers can adapt their approach to soften the impact:
- Recalculate Budgets with Tax in Mind – Build the expected tax into your ad spend planning so you know the true cost per acquisition.
- Focus on Conversion Rate Optimization (CRO) – With increasing cost per click, optimizing the number of those clicks that convert is even more important.
- Audit Campaign Performance – Cut waste spend on keywords or groups that perpetually underperform.
- Explore Exemptions if Eligible – Certain companies are eligible for exemptions with the Department of Revenue. Verify your status ahead of time.
Conclusion:
Beginning October 1, 2025, sellers on Amazon who have Washington billing addresses will experience higher ad fees because sales tax will be added to Sponsored and Display Ads. Although it might appear to be a small percentage, the overall effect can be considerable for companies with big ad spending budgets.
The most important lesson is straightforward: plan. Shift your budgets, optimize your campaigns, and double down on conversion optimization. Sellers who adjust early will not only survive the new fees but thrive in an ever-more crowded Amazon landscape.
