Businesses often purchase pieces of tangible personal property that, because of the nature of the items, are affixed to the ground and/or a structure. For example, a liquid storage tank may be purchased, delivered to a business site, and affixed in such a way as to be functional.
When a business is sold, the question often arises whether these items are real property or tangible personal property. If the items are personal property, the portion of the sale attributable to their value is subject to sales tax or use tax. If the items are real property, the portion of the sale attributable to their value is subject to real estate excise tax.
In Washington, common law guidelines are used to distinguish tangible personal property from real property.
Whether an item has become part of the real property (a fixture) depends on:
- Actual annexation (attachment or affixing in more than a temporary way),
- Application to the use or purpose for which the realty is purchased, and
- The intent of the party to make the item a permanent part of the realty.
The first two of these criteria are objective; the third is subjective, though it is the primary determining factor. The intent of the annexor is best determined from the facts and circumstances surrounding the attachment.