Quick facts: Washington
- Prime contractor
- Retailing B&O; collects sales tax on the full contract price
- Subcontractor
- Wholesaling B&O with a reseller permit from the prime
- Rate
- The rate where the work is performed
- Materials in the building
- Buy with a reseller permit
- Tools and supplies
- Contractor pays sales or use tax
- Rule
- WAC 458-20-170
Fees, rules and rates change, often on July 1 and January 1. Verify every item with the responsible agency before you rely on it.
Short answer: In Washington, a prime contractor working for a homeowner or other consumer collects retail sales tax on the full contract price, at the rate where the work is done, and reports under retailing B&O. A subcontractor with a reseller permit from the prime reports wholesaling B&O and does not collect sales tax.
Updated October 12, 2026. Requirements and fees change; confirm with the agency named on this page.
Washington taxes most construction as a retail sale. That surprises contractors from other states, where labor is often untaxed. If you work directly for property owners, you are collecting sales tax on your whole price. This guide explains who collects it, at what rate, and how subcontractors and materials fit in.
Do Washington contractors charge sales tax?
Yes, when you work for the consumer. The Department of Revenue's rule, WAC 458-20-170, says "Prime contractors are taxable under the retailing classification" and "Prime contractors are required to collect from consumers the retail sales tax measured by the full contract price." The rule defines a prime contractor as "a person engaged in the business of performing for consumers," the construction work. The Department's construction tax matrix puts it simply: "Sales tax is collected and due on the total contract price."
Which sales tax rate do you charge?
The rate where the work happens, not where your shop is. The Department of Revenue says "Contractors performing retail services must collect sales tax based on the tax rate of the jurisdiction" where the services are performed. A contractor based in one city who works in another charges the rate where the job is.
Do subcontractors collect sales tax?
Not when the prime gives them a reseller permit. WAC 458-20-170 taxes "subcontractors under the wholesaling classification upon the gross contract price." The construction matrix says a subcontractor is "Subject to wholesaling B&O tax classification, if provided a reseller permit by general or prime contractor." "Otherwise, retailing B&O tax classification." And: "If general or prime contractor provides reseller permit to subcontractor," the subcontractor "then does not collect retail sales tax on contract price." The Department of Revenue adds: "Subcontractors on custom construction projects (a wholesaling activity) must obtain a reseller permit" from the prime or another subcontractor. Keep a copy of every permit you accept.
Do you pay sales tax on materials?
It depends on whether the material stays in the building. Per the construction matrix, a prime contractor "Does not pay sales tax on materials which become a permanent part of the building." and "May use a reseller permit to purchase these items." But the "Contractor pays sales/use tax on all materials consumed by him (tools, sandpaper, etc.)"
What about building on your own land?
Speculative building is taxed differently. WAC 458-20-170 says "Speculative builders must pay sales tax upon all materials purchased by them," and the Department of Revenue notes "Speculative builders are not subject to B&O tax or retail sales tax on the sale of the real estate."
How to set up sales tax correctly
- Get your state business license and tax registration. See B&O tax and bookkeeping basics.
- Apply for a reseller permit if you buy materials for resale or work as a sub.
- Show sales tax on customer invoices at the job-site rate.
- Collect reseller permits from primes before invoicing them without tax.
- Report retailing and wholesaling income on the right lines of your excise tax return.
Washington construction tax has more special cases, including government contracting and public road work. The Department of Revenue's construction guide covers them.
This guide is general education, not legal advice. Rules and fees change, so confirm the current requirement with the Department of Revenue before you act.
Already running jobs?
Then Operator takes it from here.
A business audit and a plan, an online mentor you can ask any time, team training for your crew, and deadline reminders. $79/month, any state, cancel anytime.
Get told when a Washington rule on this page changes
Washington fees and contractor rules change, often on July 1 and January 1. Leave your email and Andy will email you when a fee or rule in these guides changes. Nothing is sent automatically, and you can ask us to stop at any time.
We do not sell your information. See our Privacy Policy.
Common questions
Do contractors charge sales tax on labor in Washington?
Yes, for prime contractors working for consumers. WAC 458-20-170 requires prime contractors to collect retail sales tax measured by the full contract price, which covers the whole job, not only materials.
Which sales tax rate does a Washington contractor charge?
The rate of the jurisdiction where the work is performed. The Department of Revenue says contractors performing retail services collect sales tax based on that location's rate, not the rate where the business is based.
Does a subcontractor charge sales tax to the general contractor?
Not if the general or prime contractor provides a reseller permit. The subcontractor then reports under the wholesaling B&O classification and does not collect retail sales tax on the contract price.
Sources
Official pages checked on 2026-10-12.
- app.leg.wa.gov/WAC/default.aspx?cite=458-20-170
- dor.wa.gov/education/industry-guides/construction/overview
- dor.wa.gov/education/industry-guides/construction/construction-tax-matrix