Washington voters decide Tuesday whether to repeal a 9.9% income tax on household income above $1 million, set to start in 2028.
If your store runs through an LLC or S corporation, its profit flows onto your personal return, and that is how it reaches this tax. For the store owners we teach at Ecommerce Paradise, Initiative 645 decides whether a $1 million year, from profit, a sale or both, costs an extra 9.9% on the excess. It matters most to Washington residents, to owners with Washington-source income, and to anyone weighing a move because of a tax bill.
Most stores will never put $1 million on a personal return, and that is the first fact to hold onto. Below: what is on the ballot, how it got there, what the math does to a best-ever year or an exit, and five moves to make before the result. I’m not a tax advisor or a lawyer, so use the numbers as a framing tool and take your real ones to a CPA.
Whatever Washington decides, an owner who relocates still needs a mailing address that follows them. A real street address with scanned mail keeps your home address off public filings and supplier forms. Get a street address and mail scanning with AnytimeMailbox →
Washington I-645: Repeal Vote on a 9.9% Income Tax Is Nov. 3
Initiative 645 is titled “Repeal Tax on Household Income Over $1 Million and Prohibit State and Local Taxes on Income,” according to the Tax Foundation. A yes vote repeals the tax. A no vote keeps it, per KUOW’s October 8 debate coverage.
Gov. Bob Ferguson approved the tax on March 30, 2026, as ESSB 6346, according to RSM. It applies to tax years beginning January 1, 2028, with the first returns and payments due in 2029. The base starts from federal adjusted gross income, minus a $1 million standard deduction per individual. Married couples and domestic partners share one $1 million deduction, per RSM.
Washington has no personal income tax today. The Tax Foundation notes that the state already taxes business through its gross receipts Business & Occupation (B&O) tax, and that Washington has 672,472 small businesses, most of them pass-throughs.
Pass-through owners get a separate option. Grant Thornton reports an elective entity-level tax at the same 9.9% for partnerships, LLCs and S corporations, elected by June 15 each year and irrevocable for that year. Participating owners receive a nonrefundable credit for their share.
The new tax sits next to Washington’s existing capital gains excise tax. Per Grant Thornton, that tax is 7% on certain long-term gains, with a supplemental 2.9% on Washington capital gains over $1 million, and the income tax gives a credit for capital gains tax paid in the same year. The Department of Revenue lists a deduction for gains from selling all or substantially all of a qualified family-owned small business, and a standard deduction of $278,000 for 2025.
The size of the group is small. The Department of Revenue now estimates about 25,000 paying households, up from 21,000, according to a startup law tracker last updated October 28. The state’s fiscal impact statement says repeal would cut state revenue by about $11.4 billion over fiscal years 2027 through 2031, KOMO reported on October 8.
The polling splits on wording. In a DHM Research survey of 800 Washington residents taken September 14 to 21, 57% said no to repeal and 35% said yes when shown ballot language with budget-impact wording, according to a Seattle Times report. Without that wording, 44% opposed repeal, 40% favored it and 16% were undecided. The poll sponsor was not stated.
Emergency Clause Blocked a Referendum, So I-645 Went to Ballot
Lawmakers attached an emergency clause to the tax, which blocked a referendum, according to the Tax Foundation. Opponents then filed I-645 as a repeal initiative. Brian Heywood, founder of Let’s Go Washington, sponsored it, and the campaign submitted over 500,000 signatures, per CPA Practice Advisor.
The Tax Foundation also reports that a constitutional challenge to the tax is pending, since the state constitution has generally been read to bar income taxation. The startup law tracker lists a February 5, 2027 summary judgment hearing in Petter. So even a no vote on I-645 may not end it.
Each side has a case. Rian Watt, executive director of the Economic Opportunity Institute, argues that repeal would cut schools and health care to give the wealthiest residents a tax break, and says the law carries the largest small-business tax break in state history. The tracker backs part of that: from January 1, 2029 the small business B&O credit rises from $55 to $125 a month, and the no-return threshold rises from $125,000 to $250,000.
Jaime Herrera Beutler, a former congresswoman, argues for repeal. She says the tax would hit small and medium-sized businesses that pay through business income hardest, and she doubts the $1 million line will hold, calling the promise a “pie crust promise, easily made, easily broken,” per KUOW. The Tax Foundation says one lawmaker has floated a threshold as low as $250,000. Watt says the governor has said he would veto that.
Washington is not the only state voting on a tax question this week. Colorado voters face their own income tax choice the same day, per the Tax Foundation, and I covered Colorado Amendment 87 surviving court last month.
What a 9.9% Tax Above $1M Means for Store Owners and Exits
My read: this is a narrow tax with a wide ripple. Narrow, because about 25,000 households pay it. Wide, because every owner who ever hopes to sell a store has a reason to care what a state does to the year of the sale.
Start with an ordinary profit year. This is hypothetical math, ignoring credits, deductions and the entity election. A pass-through store netting $1.4 million in a year puts $400,000 above the line, and 9.9% of that is $39,600. A store netting $2.5 million puts $1.5 million above it, a bill of $148,500. If you are nowhere near those numbers, nothing in this section changes your tax.
The exit is where owners get surprised. The Tax Foundation says someone selling a business built over many years could cross $1 million in a single year. How much of a sale gain the income tax reaches is not settled in the summaries I read. Grant Thornton does not say how business-sale gains are treated, and the capital gains rules interact with the new tax through the credit. That is a CPA question, and you want the answer before you sign a letter of intent, not after. I walked through the deal-structure side in my asset sale versus equity sale breakdown.
Now the sale price itself, again as hypothetical math on real market data. Flippa’s H1 2026 data puts the average ecommerce profit multiple at 1.55x and the top-quartile multiple at 2.75x. The average peaked at 2.48x in H1 2023, so it has fallen 37.9%. At 1.55x, a store clears $1 million at about $645,000 of annual profit. At 2.75x, it clears $1 million at about $364,000. Listings ask for more than they sell for, which I showed in my 200-listing asking multiples post, so plan on the lower number.
That gives three scenarios, each with a threshold. Under about $350,000 of profit, a sale at a normal multiple likely stays under $1 million and this tax is background noise. Between $350,000 and $650,000, you live in the zone where a strong multiple, a strong year or a lowered threshold could pull you in. Above $650,000 of profit, ask a CPA to model both outcomes of I-645 now.
On moving: do not relocate over a headline. Changing your address is easy. Changing your domicile in a way that holds up is not, and moving does not erase every connection. Per Grant Thornton, Washington taxes residents on all income and nonresidents on Washington-source income, and nonresident business income is apportioned by a single receipts factor, with tangible goods sourced to where they are delivered. Whether that reaches a dropshipper shipping to Washington customers, I don’t know, and I would not assume it doesn’t. If you are leaving for other reasons, such as the nomad life, my guide to virtual business addresses for an LLC covers keeping a clean public address.
The wider point is the one I would not skip. States are hunting for revenue, and a vote like this sets a template other legislatures copy. An exit in 2030 will run under rules nobody has written yet, so the part you control is how sellable the store is. Buyers pay for clean books, a business that doesn’t need you every day, and a supplier base that doesn’t rest on one vendor. I made the owner side of that case in my owner dependence post.
The supplier side is in my supplier concentration post. Concentrated supply is one of the first things a buyer discounts, and a high-ticket store that leans on a single manufacturer feels that at the offer stage.
That is also why I like building a store with an exit in mind from day one. If you want a high-ticket store built to run without you, my team’s turnkey done-for-you service is how I’d do it. My high-ticket dropshipping guide explains the model first.
A store that is worth more at exit is a store that has been scaled on purpose, and a $1 million year is a good problem to have. See how my team scales the store you already have →
Before the Result: 5 Moves for Store Owners With $1M+ Years
Do these in order. The first one tells you whether the other four apply to you.
- Pull your best profit year and your realistic sale price, then compare both to the $1 million line. Your bookkeeping tool should show this in minutes. I’d use Finaloop for ecommerce books. QuickBooks is the standard option.
- Do nothing irreversible tonight. Wait for the result, then for the February 5, 2027 hearing in Petter, and write down the date you will revisit. A headline is not a reason to dissolve an entity or sign a lease in another state.
- If you might sell within five years, get a CPA to model a sale year under both outcomes, including the capital gains credit and the small business deduction. Then read what buyers check in the due diligence checklist. My Shopify transfer checklist covers the handoff.
- If you own a pass-through, put the June 15 entity election date on your calendar for 2028 and ask your CPA whether it fits. Keep store cash in its own account so the numbers are clean, which is what a Mercury business account is for.
- If you are relocating or already travel, build the paper trail early: a mailing address, health coverage and a way to pay suppliers abroad. SafetyWing covers nomad health insurance. Wise handles multi-currency transfers. Then Explore Turnkey Builds if you want a second set of eyes on the plan.
Frequently Asked Questions
When does the Washington income tax start?
Tax years beginning January 1, 2028, with the first returns and payments due in 2029, according to RSM. A yes vote on I-645 repeals it before it starts.
Does a no vote end the legal fight?
Not necessarily. The Tax Foundation reports a constitutional challenge is pending, and a summary judgment hearing is set for February 5, 2027, per the startup law tracker.
Does this tax apply to a store I run from another state?
Nonresidents owe tax on Washington-source income, per Grant Thornton, with business income apportioned by a single receipts factor. Whether your sales to Washington customers reach the $1 million line is a question for a CPA. My dropshipping taxes and legal requirements checklist covers the basics.
Does an LLC help me avoid it?
The tax runs off your personal income base, which starts from federal adjusted gross income, so an LLC alone does not take income out of reach. The entity-level election is the pass-through tool the law provides. If you are still setting up, read how I’d start an LLC today. Then see how to keep it in good standing.
Should I rush to sell my store before 2028?
I’d not decide that on tax alone. Sale timing depends on your profit, the multiple and your buyer pool, and SBA acquisition loan rules shape who can pay. Model it with a CPA first, and read what to do with the money in the first year.
I’m nowhere near $1 million. What should I focus on instead?
Get the store profitable and sellable. Grab my free high-ticket niches list if you’re still choosing where to start. Keep your filings current too, including extended returns and FBARs if you work abroad.
Where do I park proceeds after an exit?
That is a separate decision. Talk to a tax professional before you move money, and compare brokerages with fees and account types in mind, since I’m not a financial advisor.
Want 1-on-1 help planning the next year of your store, from margins to a clean exit? Get the coaching details →
Watch the Washington count Tuesday night, then call your CPA with real numbers. Subscribe to the YouTube channel for daily breakdowns. More breaking news coming through the day.
Related Articles
If this was useful, these go deeper:
- Asset Sale vs Equity Sale: What It Actually Means When You Sell Your Ecommerce Business
- Ecommerce Listings Ask 2.86x Earnings in 200-Listing Study
- Colorado Amendment 87 Survives Court, Vote Is Nov. 3
- How Clean Books Can Add Real Value to an Ecommerce Exit
- How I’d Start an LLC for an Ecommerce Business Today
Trevor Fenner is an ecommerce entrepreneur and world traveler from Seattle, Washington, and the founder of Ecommerce Paradise, a platform focused on helping entrepreneurs build and scale profitable high-ticket ecommerce and dropshipping businesses. With over a decade of hands-on experience, Trevor specializes in high-ticket dropshipping strategy, niche and product selection, supplier recruiting and onboarding, Google & Bing Shopping ads, ecommerce SEO, and systems-driven automation and scaling. Through Ecommerce Paradise, he provides free education via in-depth guides like How to Start High-Ticket Dropshipping, advanced training through the High-Ticket Dropshipping Masterclass, and fully done-for-you turnkey ecommerce services for entrepreneurs who want a faster, more hands-off path to growth. Trevor is known for emphasizing sustainable, real-world ecommerce models over hype-driven tactics, helping store owners build scalable, sellable, and location-independent brands.
He maintains homes in Seattle and Bali, spends most of the year overseas, and usually returns to Seattle for about a month each summer.
