The Larger National Trend
Washington state’s expansion of sales tax to technology services is also part of a much larger national trend: Governments are searching for new revenue sources in an economy that has shifted from manufacturing to services and digital work. But the unintended consequence of aggressive taxation is often the gradual migration of wealth, investment, and entrepreneurship elsewhere.
Historically, people and businesses were largely tied to geography. Factories, farms, railroads, and ports could not easily move. Today, technology companies can. A managed services provider in Boston can support a customer in Seattle. A software developer in Florida can serve clients nationwide. Capital, talent, and businesses are more mobile now than at any point in history. And in 2026, some states are simply more friendly to businesses operations of all types, especially if that business considers moving its headquarters to that business-friendly state.
Mobility changes the equation. Washington’s Oct. 1, 2025, expansion of sales tax rules on technology services—combined with B&O gross receipts taxes and the state’s broader push toward higher taxation—signals a growing willingness to reach beyond traditional physical borders and tax remote economic activity. For many companies, especially smaller technology firms, the concern is not just the tax itself. It is the cumulative effect of compliance complexity, administrative burden, multistate filings, audit exposure, and regulatory uncertainty.
Once a company crosses nexus thresholds in states such as Washington, it effectively enters a new compliance universe. You may have no office there, no employees there, and no physical infrastructure there—and yet, you are now expected to understand sourcing rules, collect and remit sales taxes, track exemptions, register with state agencies, monitor local tax jurisdictions, and potentially defend your positions during an audit.
Critics argue that states underestimate the long-term economic consequences of continually expanding taxation. And to be clear, that expansion is not just the simple sales tax rate.
The burden of the combined effects previously described can be an order of magnitude more cumbersome than an already significant simple sales tax rate. Over the past several years, high-tax states such as California, New York, New Jersey, Colorado, Illinois, and Washington have seen growing debates around the migration of high-net-worth individuals, entrepreneurs, and businesses to states such as Texas, Florida, Tennessee, and Nevada.
In Washington specifically, concerns intensified following the passage of the state’s new 9.9% “millionaires’ tax,” scheduled to take effect in 2028. Business leaders, investors, and entrepreneurs have warned that layered taxes and an increasingly hostile business climate may push innovation and capital elsewhere.
Don’t look now, but that is already happening. It’s not simply about wealthy individuals paying more taxes. The deeper concern is what happens when the people who create companies, fund startups, hire employees, and generate investment decide the environment no longer justifies the risk or the unambiguous burden especially when the grass is greener elsewhere.
States rarely lose population overnight. Instead, they experience a slow erosion, such as these:
- One founder relocates to Austin.
- One investment firm moves to Miami.
- One technology company expands in Nashville instead of Seattle.
- One remote business decides not to establish nexus in another high-tax jurisdiction.
- Certain remote businesses stop doing business in certain states entirely.
Individually, these decisions appear minor. Collectively, they reshape economic geography. Examples are plentiful, and here’s one: In 2024, Colorado experienced its first net-negative migration.
Supporters of these taxes argue they are necessary to fund public services, reduce inequality, and modernize outdated tax systems. Opponents counter that states risk creating an environment in which mobility becomes the ultimate tax avoidance strategy. In the digital economy, geography matters less than ever before. When businesses realize they can move faster than governments can tax them, states may discover that the most valuable assets—entrepreneurs, capital, and innovation—are also the easiest to lose. Even Dean Wormer wouldn’t be surprised if Bluto quoted Rand’s Atlas Shrugged.