Because Washington has no personal income tax, the state leans on excise taxes to fund schools, roads, and public services. A Washington state excise tax is a targeted tax on a specific transaction, product, or business activity rather than a broad tax on all consumer purchases. The main ones are the real estate excise tax paid at closing, the business and occupation tax on gross receipts, the capital gains tax on certain financial assets, and per-unit taxes on fuel, tobacco, vapor products, and cannabis. Most are filed with the Department of Revenue on the combined excise tax return, and late payment triggers penalties that start at 9%.
The business or person closest to the taxable activity usually owes the tax. A fuel distributor pays the motor fuel tax, a property seller pays REET at closing, and a cannabis retailer collects the cannabis excise tax at the register. The cost often gets built into the price consumers pay, so you can bear the burden without ever filing a return yourself.
Real Estate Excise Tax
The real estate excise tax, or REET, applies every time real property changes hands in Washington for consideration. It uses a graduated structure, so more expensive sales are taxed at higher marginal rates on the portion of the price above each threshold.
- 1.1% on the portion of the selling price up to $525,000
- 1.28% on the portion from $525,000.01 to $1,525,000
- 2.75% on the portion from $1,525,000.01 to $3,025,000
- 3% on the portion above $3,025,000
Agricultural land and timberland are excluded from the graduated structure and taxed at a flat 1.28% regardless of price.1Washington Department of Revenue. Real Estate Excise Tax Cities and counties may add a local REET on top of the state portion, so the total rate varies by location. The tax is due to the county treasurer on the date of sale.
REET Exemptions
Not every transfer triggers REET. Transfers by gift, inheritance, or devise are excluded, so passing property to heirs through a will or intestacy does not create a REET obligation. Transfers between spouses or domestic partners as part of a divorce or dissolution are also excluded. A transfer that is merely a change in the form of ownership with no change in who actually benefits, such as moving property into a family-owned LLC, qualifies as well, though a subsequent sale to an outside party within three years can retroactively trigger tax on the original transfer.2Washington State Legislature. RCW 82.45.010 – Sale Defined Other common exemptions cover government transfers, foreclosure proceedings, and transfers into irrevocable trusts.
Business and Occupation Tax
The business and occupation tax, known as the B&O tax, is Washington’s primary tax on business activity. It applies to gross receipts rather than profits, so you owe B&O tax even if your business loses money for the year. There is no deduction for labor, materials, or other expenses. The rate depends on how your income is classified:
- Retailing: 0.471%
- Wholesaling: 0.484%
- Manufacturing: 0.484%
- Service and other activities: 1.5% (gross income under $1 million in the prior year), 1.75% ($1 million to $4,999,999), or 2.1% ($5 million or more)
The service classification uses tiered rates that climb with revenue.3Washington Department of Revenue. Business and Occupation Tax Classifications Small businesses with very low liability may qualify for a B&O tax credit that effectively zeroes out the amount owed. The credit phases out as your total B&O liability rises, and the threshold depends on both your filing frequency and what share of your income falls under the service classification.4Washington Department of Revenue. Credits
Capital Gains Tax
Washington taxes long-term capital gains on the sale of stocks, bonds, and other financial assets. The state classifies this as an excise tax on the privilege of selling certain assets, not an income tax, and the Washington Supreme Court upheld that characterization. Starting with tax year 2025, tiered rates apply:
- 7% on the first $1,000,000 of taxable Washington capital gains
- 9.9% on gains above $1,000,000
The 9.9% rate combines the base 7% with an additional 2.9% surcharge.5Washington Department of Revenue. New Tiered Rates for Washington’s Capital Gains Tax Before the tax kicks in, you subtract a standard deduction. For 2025, that deduction is $278,000 and adjusts annually for inflation.6Washington Department of Revenue. Capital Gains Tax The deduction is per individual, not per transaction, so a married couple filing jointly still gets only one.
What’s Exempt
The tax has a long list of carve-outs. Real estate is entirely exempt, so gains from selling your home or an investment property are not subject to it. Retirement account assets held in 401(k), IRA, Roth IRA, 403(b), and 457(b) plans are also excluded. Other exemptions cover livestock sold by qualifying farmers and ranchers, timber and timberland, depreciable business property, commercial fishing privileges, and goodwill from the sale of a licensed auto dealership.7Cornell Law School. WAC 458-20-301 – Capital Gains Excise Tax Definitions, Deductions, Exemptions, and Allocation of Gains and Losses
The return is due on the same date as your federal income tax return, typically April 15, and must be filed electronically. You need to include a copy of your federal return along with all schedules and 1099-B forms related to your capital gains.8Washington State Legislature. Chapter 82.87 RCW – Capital Gains Tax
Fuel Taxes
Washington imposes per-gallon excise taxes on motor vehicle fuel and special fuel (primarily diesel). These are fixed-cent amounts, not percentages. For the period from July 2025 through June 2026:
- Gasoline: 55.4 cents per gallon
- Diesel: 58.4 cents per gallon
Federal fuel taxes apply on top of those state rates.9Washington Department of Revenue. Motor Vehicle Fuel Tax Rates The tax is collected from fuel distributors, not at the pump, though you pay it indirectly through the retail price. Fuel used by government-owned road construction and maintenance vehicles, publicly owned firefighting equipment, and federal government vehicles is exempt.10Justia. Washington Code 82.38 – 82.38.080 Exemptions Farm fuel users also receive sales tax exemptions for diesel and biodiesel purchased for off-highway use.
Tobacco, Vapor, and Cannabis Taxes
Washington’s cigarette excise tax is $3.025 per pack of 20, one of the highest in the country. Cigars, pipe tobacco, chewing tobacco, and similar products are taxed separately based on wholesale value at the distributor level.11Cornell Law School. WAC 458-20-185 – Tax on Tobacco Products
Vapor products are taxed by the milliliter. Accessible containers holding more than 5 milliliters of solution are taxed at $0.09 per milliliter; all other vapor products are taxed at $0.27 per milliliter. A significant change took effect on January 1, 2026: any vapor product containing nicotine, whether derived from tobacco or synthetically produced, is now classified as a tobacco product and subject to the tobacco products tax instead.12Washington Department of Revenue. Vapor Products Tax
Licensed cannabis retailers collect a 37% excise tax on every retail sale of cannabis concentrates, useable cannabis, and cannabis-infused products. This tax is separate from and stacks on top of regular state and local sales taxes, which makes the effective tax burden on cannabis noticeably higher than on most consumer goods.13Washington State Department of Revenue. Cannabis Excise Tax – Tax Reference Manual Sales to qualifying medical cannabis patients who hold a valid recognition card are exempt from the excise tax through June 30, 2029, provided the product is sold by a retailer with a medical endorsement and meets Department of Health compliance standards.14Washington State Legislature. Substitute House Bill 1453 – Passed Legislature 2024 Regular Session
Other Excise Taxes
Washington taxes the possession of hazardous substances within the state. Most hazardous substances are taxed at 0.7% of wholesale value. Petroleum products use a separate per-barrel rate that started at $1.09 per barrel in 2019 and adjusts annually based on a federal price index, so the current per-barrel figure is higher.15Washington State Legislature. Chapter 82.21 RCW – Hazardous Substance Tax Revenue funds toxic cleanup, stormwater management, and related environmental programs.
Local gambling taxes apply to gross receipts from punchboards, pull-tabs, bingo, raffles, amusement games, and social card games. County gambling taxes apply only in unincorporated areas, regardless of whether cities in the same county also impose the tax.16Washington State Department of Revenue. Local Gambling Taxes
Businesses that collect solid waste must collect and remit the solid waste collection tax under Chapter 82.18 RCW. It applies to charges for hauling and disposal and is reported on the combined excise tax return.17Cornell Law School. WAC 458-20-250 – Solid Waste Collection Tax
Filing Deadlines
Most Washington excise taxes are reported on the combined excise tax return filed with the Department of Revenue. The DOR assigns your filing frequency based on your estimated tax liability. For 2026:
- Monthly filers: returns are due the 25th of the month following the reporting period. January 2026 activity is due February 25, 2026.
- Quarterly filers: returns are due the last day of the month following the quarter’s end. Quarter 1 is due April 30, Quarter 2 is due July 31, and so on.
- Annual filers: the return for calendar year 2026 is due April 15, 2027.
When a due date falls on a weekend or legal holiday, the deadline shifts to the next business day.18Washington Department of Revenue. 2026 Excise Tax Return Due Dates REET follows its own timeline and is due to the county treasurer on the date of sale, not on the combined return schedule.1Washington Department of Revenue. Real Estate Excise Tax The capital gains tax return is filed separately and follows federal income tax deadlines.
Penalties and Interest for Late Payment
Missing a Washington excise tax deadline gets expensive quickly. Late payment penalties escalate the longer the balance sits:
- 9% penalty added immediately if the tax is not paid by the due date
- 19% total penalty if still unpaid by the end of the following month
- 29% total penalty if still unpaid by the end of the second month after the due date
On top of those penalties, the Department of Revenue charges interest at 6% annually on delinquent accounts for calendar year 2026.19Washington Department of Revenue. Interest Rate Tables A separate 5% penalty applies to unregistered taxpayers, meaning businesses that should have been collecting and remitting excise taxes but never registered with the DOR. That penalty is assessed on top of the unpaid tax when the department discovers the oversight.20Cornell Law School. WAC 458-20-228 – Returns, Payments, Penalties, Extensions, Interest, Stays of Collection
Successor Liability When Buying a Business
Anyone purchasing a Washington business or its inventory should know about successor liability. If the seller owes unpaid excise taxes, the buyer can become personally liable for them. The law requires the buyer to withhold enough from the purchase price to cover any outstanding tax until the seller produces a receipt from the Department of Revenue showing the balance is paid in full or a certificate confirming nothing is owed. If the seller does not pay within ten days of the sale, the buyer is on the hook for the full amount.21Washington State Legislature. Washington Code 82.32.140 – Taxpayer Quitting Business, Liability of Successor
There is a way to protect yourself. Give written notice to the DOR about the acquisition. If the department does not issue an assessment against the former owner within six months of receiving that notice, you are cleared of liability for the seller’s unpaid taxes.