Washington's new July 1 tax laws reach deeper into your wallet
New Washington state tax laws, including the elimination of sales and use tax exemptions for existing data centers, are taking effect on July 1. These changes aim to boost state revenue but will increase operational costs for data centers and other businesses. Separately, Seattle has enacted a one-year ban on new AI data center construction.
The Washington State Legislature passed a package of new tax laws during its 2026 session, set to take effect on July 1, impacting various sectors including data centers and mortgage lenders. These measures are designed to increase state revenue.
One key change, Engrossed Substitute Senate Bill 6231, eliminates existing sales and use tax exemptions for data centers that previously qualified, though new facilities can still apply for benefits. This move, according to the article, makes it more expensive for established operators to maintain facilities in Washington, a state increasingly viewing the industry as a "nuisance." Separately, Seattle enacted a one-year ban on new AI data center construction.
Other legislative changes include Substitute House Bill 2089, which narrows the business and occupation tax exemption for mortgage interest income, primarily affecting lenders with less than $10 billion in annual mortgage originations, with new funds allocated to wildfire preparation. Engrossed Senate Bill 6347 restores state estate tax rates to pre-July 2025 levels, increasing taxes for estates of those dying on or after July 1. Additionally, Engrossed Substitute House Bill 2442 grants local governments the authority to impose property tax levies for public health and redirect existing revenue for criminal justice and affordable housing, bypassing direct voter approval for these specific levies. The larger state income tax, passed during the same session, faces a constitutional challenge and is subject to a voter repeal initiative in November.