Local Governments See Updates to Sales and Use Taxes After 2026 Legislative Session

Passed during the 2026 legislative session, HB 2442 is a comprehensive bill that gives local governments new revenue sources and provides flexibility for use of some existing revenue sources.

In April of this year, MRSC’s Steve Hawley wrote a blog detailing changes HB 2442 made to levy lid lifts. This blog, instead, will provide a brief overview of several other revenue sources addressed in HB 2442.

REET Can Be Used for Nuisance Abatement

Cities and counties have been able to use REET 1 and REET 2 for various capital projects listed on their capital facilities or capital improvement plans. In 2025, the legislature amended REET statutes to allow REET 1 to be used for REET 2 purposes and vice versa (see my prior blog covering changes to REET in 2025).

Effective July 1, HB 2442 now allows REET 2 (and by extension REET 1) to be used for the abatement of nuisance properties.

New Children and Family Services Sales Tax Available

Beginning January 1, 2027, cities and counties can impose a new children and family services sales tax up to 0.01%. It is important to note that while many sales tax components are in one-tenth of one percent (0.1%) increments, the children and family services sales tax is one one-hundredth of one percent (0.01%).

To enact the new sales tax, a city or county must pass an ordinance or resolution imposing it; voter approval is not required. Revenues are restricted to supporting services that assist children and their families, including:

• Childcare;
• Before- and after-school care that addresses mental, health, social, and behavior issues, as well as perinatal support services;
• Shelter and rental assistance; and
• Client transportation.

If both the city and county impose the children and family services sales tax, the county must credit its tax so that the total tax collected does not exceed 0.01%.

Expanded Use of Housing and Related Services Sales Tax

The revenues from the housing and related services sales tax (RCW 82.14.530) can be used for affordable housing and facilities that provide housing-related programs.

Beginning July 1, HB 2442 expands uses of these revenues to “rehabilitating existing affordable housing, which may include emergency, transitional, and supportive housing.”

A portion of the housing and related services sales tax can now also be used for rental assistance to people of certain population groups at or below 60% of the median income of the county imposing the tax. Such population groups include:

• People with behavioral health disabilities;
• Veterans;
• Senior citizens;
• People who are homeless or at risk of being homeless (including families)
• Unaccompanied homeless youth or young adults;
• People with disabilities; and
• Domestic violence survivors.

County Rental Car Sales Tax Can Be Used for Criminal Justice

Counties can impose a sales tax on retail car rentals under RCW 82.14.049. Previously, this sales tax could only be used for certain sports facilities and youth or amateur sporting activities or facilities.

Beginning July 1, the rental car sales tax can now also be used for criminal justice purposes as defined in RCW 82.14.345. The statute describes these as:

...activities that substantially assist the criminal justice system, which may include circumstances where ancillary benefit to the civil justice and behavioral health systems occurs.

Some examples listed in the statute include:

• Domestic violence services, such as those provided by domestic violence programs, community advocates, and legal advocates, as those terms are defined in RCW 70.123.020;
• Staffing adequate public defenders to provide appropriate defense for individuals;
• Diversion programs;
• Reentry work for inmates;
• Local government programs that have a reasonable relationship to reducing the numbers of people interacting with the criminal justice system, including (but not limited to) reducing homelessness or improving behavioral health;
• Community placements for juvenile offenders; and
• Community outreach and assistance programs, alternative response programs, and mental health crisis response, including (but not limited to) the recovery navigator program.

Flood Control Zone Districts Recovery Assistance Funds

Flood control districts provide flood water and stormwater control in counties. Previously these districts were limited to activities focused on building and maintaining floodwater/stormwater control infrastructure.

Beginning July 1, HB 2442 allows a flood control district to use funds or to transfer funds to a county in order to provide recovery assistance to households and businesses damaged by a flood if the governor has issued an emergency proclamation.

New County Public Health Clinic Property Tax Levy Available

Beginning July 1, HB 2442 gives counties the ability to impose a public health clinic levy up to $0.05 per $1,000 in assessed value, but the funds generated can only be used for the operation, maintenance, and capital expenses of public health clinics.

This new property tax levy can either be levied as part of the county’s regular property tax levy or as a separate property tax levy, independent of the regular property tax.

A ‘public health clinic’ can be a fixed or mobile publicly operated site that provides low-barrier public health services including:

• Primary, dental, and reproductive health care;
• Treatment, control, and prevention of communicable diseases, substance use disorders, and other health conditions;
• Maternal, infant, child, and family health and nutrition;
• Behavioral health care;
• Assistance with health care enrollment; and
• Access and referrals to other community services.

Veterans’ Assistance Levy and Mental Health and Developmental Disabilities Assistance Levy Changes

Counties have the ability to impose a veterans’ assistance property tax levy (RCW 73.08.080) and a mental health and developmental disabilities assistance property tax levy (RCW 71.20.110), which were previously part of a county’s regular property tax levy.

Beginning July 1, HB 2442 allows these specific property tax levies to be levied separately from the county’s regular property tax levy. Additionally, these levies are not impacted by the $5.90 aggregate levy rate limit.

Conclusion

While many local governments are looking carefully at streamlining their budgets, these changes provide a small bit of relief by making new resources available and adding flexibility to existing sources.