Washington compliance for referral-based businesses

Key findings and relevant Washington rules (summary for use in blog content and newsletter): - Consumer protection baseline: Washington’s Consumer Protection Act (RCW Chapter 19.86) broadly prohibits unfair or deceptive acts in trade and commerce.

Referral programs that are deceptive, misrepresentative, or otherwise injurious to the public may trigger AG enforcement or private suits under RCW 19.86. (RCW 19.86) - Commercial Electronic Mail Act (CEMA, RCW Chapter 19.190): Washington’s anti-spam law (CEMA) makes unpermitted or misleading commercial emails and commercial electronic text messages unlawful.

It prohibits false or misleading information in email subject lines and forbids initiation or assistance in the transmission of commercial electronic text messages to Washington residents, subject to limited exceptions (e.g., prior affirmative consent).

Statutory damages are meaningful ($500 per message or actual damages), and recent Washington court decisions and litigation trends have expanded CEMA’s practical reach—creating substantial class-action exposure for referral programs using texts/emails. (RCW 19.190, RCW 19.190.060; AG guidance and legal advisories) - Insurance-specific rules: Washington Office of the Insurance Commissioner (OIC) provides explicit guidance on referral compensation vs. referral fees.

Key rules: referral compensation (non-cash gifts) to individuals (including clients) is limited (e.g., non-cash, max $100 aggregate per 12 months per referring individual); referral fees paid to unlicensed individuals may be cash but only if conditioned upon submission of an application and the referrer is not engaged in activities requiring an insurance producer license and is not an insured/prospective insured.

See RCW references cited by OIC and WAC 284-17-825 for details. Insurance producers must maintain records showing compliance. (WA OIC: "Referral compensation and fees" guidance; WAC 284-17-825; RCW citations cited on OIC page) - Advertising, referrals, and tax: Washington enacted ESSB 5814 (effective Oct 1, 2025) expanding the state’s retail sales tax (and related B&O tax exposure) to many advertising services.

WDOR’s interim guidance explicitly lists “referrals,” “online referrals,” and “lead generation optimization” among advertising services that can be taxable. This means lead-generation and referral-service providers should evaluate sales tax collection and B&O tax obligations and review contract sourcing and invoicing clauses.

WDOR interim guidance and tax advisories emphasize sourcing rules and documentation needed for multi-jurisdictional campaigns. (WDOR interim guidance re: ESSB 5814; tax-firm summaries) - Telemarketing/TCPA interplay: Washington’s CEMA creates obligations separate from the federal TCPA.

Even where TCPA consent rules are followed, CEMA (and state law) may still impose limits and statutory remedies for texts/emails to Washington residents. Referral-based businesses using SMS, MMS, or autodialed calls must ensure both federal TCPA compliance and Washington-specific consent/assistance rules. - Privacy and data security: Washington’s data breach and consumer privacy statutes and breach-notification rules apply when referral/lead businesses collect, store, or share personally identifying information (PII).

Obligations include secure handling of PII, honoring consumer opt-outs/consent for marketing contacts, and timely breach notifications per state law. (See state breach-notification statutes and agency guidance — recommend checking RCW 19.255 and related DOR/AG resources for specifics.) - Licensing and professional restrictions: Many regulated professions restrict or control referral fees.

Example: insurance producers (OIC guidance). Other professions (attorneys, healthcare providers, real estate licensees, insurance agents/brokers) have professional/ethical rules that may limit or forbid payment of referral fees to unlicensed parties or require disclosure.

Referral networks that connect consumers to licensed professionals should verify each profession’s rules and whether the referrer must be licensed or must structure payments as permitted reimbursements/marketing fees rather than commissions. (Recommend checking WA Bar Association ethics opinions, the real estate commission rules, Dept of Health or professional licensing boards, and OIC rules.) - Practical compliance checklist for Washington referral-based businesses (recommended actions):

Key findings and relevant Washington rules (summary for use in blog content and newsletter):

19.86) broadly prohibits unfair or deceptive acts in trade and commerce. Referral programs that are deceptive, misrepresentative, or otherwise injurious to the public may trigger AG enforcement or private suits under RCW 19.86. (RCW 19.86)

19.190): Washington’s anti-spam law (CEMA) makes unpermitted or misleading commercial emails and commercial electronic text messages unlawful. It prohibits false or misleading information in email subject lines and forbids initiation or assistance in the transmission of commercial electronic text messages to Washington residents, subject to limited exceptions (e.g., prior affirmative consent).

Statutory damages are meaningful ($500 per message or actual damages), and recent Washington court decisions and litigation trends have expanded CEMA’s practical reach—creating substantial class-action exposure for referral programs using texts/emails. (RCW 19.190, RCW 19.190.060; AG guidance and legal advisories) - Insurance-specific rules: Washington Office of the Insurance Commissioner (OIC) provides explicit guidance on referral compensation vs. referral fees.

Key rules: referral compensation (non-cash gifts) to individuals (including clients) is limited (e.g., non-cash, max $100 aggregate per 12 months per referring individual); referral fees paid to unlicensed individuals may be cash but only if conditioned upon submission of an application and the referrer is not engaged in activities requiring an insurance producer license and is not an insured/prospective insured.

See RCW references cited by OIC and WAC 284-17-825 for details. Insurance producers must maintain records showing compliance. (WA OIC: "Referral compensation and fees" guidance; WAC 284-17-825; RCW citations cited on OIC page) - Advertising, referrals, and tax: Washington enacted ESSB 5814 (effective Oct 1, 2025) expanding the state’s retail sales tax (and related B&O tax exposure) to many advertising services.

WDOR’s interim guidance explicitly lists “referrals,” “online referrals,” and “lead generation optimization” among advertising services that can be taxable. This means lead-generation and referral-service providers should evaluate sales tax collection and B&O tax obligations and review contract sourcing and invoicing clauses.

WDOR interim guidance and tax advisories emphasize sourcing rules and documentation needed for multi-jurisdictional campaigns. (WDOR interim guidance re: ESSB 5814; tax-firm summaries)

19.255 and related DOR/AG resources for specifics.)

• Consumer protection baseline: Washington’s Consumer Protection Act (RCW Chapter
• Commercial Electronic Mail Act (CEMA, RCW Chapter
• Telemarketing/TCPA interplay: Washington’s CEMA creates obligations separate from the federal TCPA. Even where TCPA consent rules are followed, CEMA (and state law) may still impose limits and statutory remedies for texts/emails to Washington residents. Referral-based businesses using SMS, MMS, or autodialed calls must ensure both federal TCPA compliance and Washington-specific consent/assistance rules.
• Privacy and data security: Washington’s data breach and consumer privacy statutes and breach-notification rules apply when referral/lead businesses collect, store, or share personally identifying information (PII). Obligations include secure handling of PII, honoring consumer opt-outs/consent for marketing contacts, and timely breach notifications per state law. (See state breach-notification statutes and agency guidance — recommend checking RCW
• Licensing and professional restrictions: Many regulated professions restrict or control referral fees. Example: insurance producers (OIC guidance). Other professions (attorneys, healthcare providers, real estate licensees, insurance agents/brokers) have professional/ethical rules that may limit or forbid payment of referral fees to unlicensed parties or require disclosure. Referral networks that connect consumers to licensed professionals should verify each profession’s rules and whether the referrer must be licensed or must structure payments as permitted reimbursements/marketing fees rather than commissions. (Recommend checking WA Bar Association ethics opinions, the real estate commission rules, Dept of Health or professional licensing boards, and OIC rules.)
• Practical compliance checklist for Washington referral-based businesses (recommended actions):

Identify the business model and all activities

lead generation, advertising services, referral payments, email/SMS outreach, data sharing.

Sector check

confirm professional/regulatory rules for each vertical your referrals touch (insurance, real estate, legal, healthcare, insurance). For insurance, follow OIC limits (referral compensation vs. referral fees) and keep records; for others, consult the applicable board.

Update marketing and messaging

ensure email subject lines and text content are accurate, non-misleading, and comply with CEMA; obtain and document express consent for commercial texts where required; maintain opt-out mechanisms and records of consent.

Contracts & disclosures

use written agreements that: define services, payment triggers (e.g., conditioned on application/submission where required), data handling and privacy obligations, indemnities for statutory damages, and sourcing/tax allocation for multi-jurisdictional advertising/lead services.

Tax review

evaluate WDOR guidance re ESSB 5814: lead generation and online referrals may be taxable as advertising services for sales tax and subject to B&O tax; update registration and tax collection procedures and consult a WA tax advisor to determine specific filing and sourcing rules.

Data privacy/security

adopt policies for securing PII, limit sharing to necessary parties under contract, honor opt-outs, and prepare breach-response plans that satisfy Washington notification requirements.

Recordkeeping

keep documentation proving compliance with professional limits, referral payment conditions, consent records for electronic marketing, invoices, and sourcing/allocation agreements for tax purposes.

Legal review & insurance

engage Washington counsel familiar with CEMA and state consumer protection exposure; consider errors & omissions or cyber liability coverage for exposure from marketing/data incidents. - Enforcement risk & litigation environment: Washington is a high-risk state for electronic-marketing class actions due to CEMA’s statutory damages and recent court decisions expanding its reach; the state’s Consumer Protection Act provides another enforcement avenue. Referral-based companies that rely on text/email acquisition or operate cross-border ad campaigns should be particularly cautious and document defenses (consent, accuracy of subject lines, opt-outs). Recommended next research/actions before publishing the blog: (1) gather and cite direct statute links (RCWs/WACs for insurance, CEMA, CPA), WDOR ESSB 5814 permanent guidance, and specific professional-board pages (Bar ethics opinions, Real Estate Commission guidance, Dept of Health rules), (2) collect short examples and safe-wording templates for consent/disclosure and payment clauses tailored to insurance/real estate/consumer referrals, (3) confirm local business licensing requirements for referral agencies (state BLS and major cities), and (4) consider an interview or quote from a WA tax or regulatory counsel to add authority.