WAC 128

Engaging in business.

Tax on real estate brokers.

Exemptions--Amounts derived from sale of real estate.

Real estate brokers and salesmen.

Real estate broker - Shared commissions and expenses

REAL ESTATE BROKERS -- SHARED COMMISSIONS AND EXPENSES Revised 2/2/09 See ETA 3145.2009

New "Economic Nexus" in Washington State May Impact "Foreign Corporations"

Real Estate Brokerage Commissions

New Apportionment Method

Tax Attorneys and CPAs - New "Economic Nexus" in Washington State May Impact Your Clients

B&O Tax Reporting Requirement Continues After Business Activity Stops

Registered Out-of-State Businesses Currently Not Reporting Income from Service Activities - New Apportionment for Certain Income

B&O TAX -- REAL ESTATE COMMISSIONS -- WHAT CONSTITUTES.Real estate commissions are subject to B&O tax on the full amount of the commission at the time of receipt by the brokerage office.Where broker is entitled to a nonrefundable monthly payment from agents regardless of whether commissions are earned by the agents, the income is subject to B&O tax.Such a nonrefundable payment is not a portion of a commission received for a particular transaction.Crescent Realty, Inc. v Department of Rev. distinguished.

B&O TAX - EXCLUSION -ADVANCE AND REIMBURSEMENTS - REAL ESTATE BROKERAGE - EXPENSES REIMBURSED BY AGENTS.A real estate brokerage may not exclude reimbursements received from its salespersons for services provided by third parties (such as telephone, multiple listings) from gross income if it is either primarily or secondarily liable for the charges, unless solely as agent.

B&O TAX -- REAL ESTATE BROKERS -- DESK FEES.Amounts earned by a real estate broker from real estate associates for use of the broker's offices, equipment, and services are subject to the B&O tax rate specifically applicable to real estate brokers rather than the tax rate on royalties earned from granting intangible rights.

B&O TAX -- REAL ESTATE BROKERS - FEES RECEIVED FROM SALES AGENTS - NOT IN EXCHANGE FOR SPECIFIC GOODS/SERVICES.Real estate brokers are taxable on their "gross income of the business," which term includes "fees," even if such fees are not in exchange for particular goods or services.

REAL ESTATE BROKERS - FEES RECEIVED FROM SALES AGENTS -CLASSIFICATION.Fees received by a real estate broker from its sales associates are taxable as "gross income of the business" under the brokers' rate provided by RCW 82.04.255.Accord: Det. No. 00-090, 20 WTD 500 (2001).

RCW 82.04.255; ETA 3145.2009: GROSS INCOME OF THE BUSINESS - REAL ESTATE BROKERAGES FIXED SHARED EXPENSES. Amounts paid by real estate brokers for fixed shared expenses to a real estate brokerage are included in real estate brokerage’s gross income of the business and taxable. That real estate brokerage deducts fixed shared expenses from real estate broker’s commissions is a matter of convenience and does not change the underlying substance of the transaction.

B&O TAX -- DEDUCTION -- REAL ESTATE BROKERS -- COMMISSIONS.Commissions earned by real estate brokers which are shared with parties who are not real estate brokers are not deductible from the measure of the broker's B&O tax.

B&O TAX -- REAL ESTATE BROKERAGE COMMISSIONS -- NON-PYRAMIDING -- CORPORATION.The non-pyramiding provision in RCW 82.04.255 applies equally to an incorporated "associate real estate broker" and to an unincorporated "associate real estate broker."

SERVICE B&O TAX -- REAL ESTATE COMMISSIONS --MEASURE OF TAX -- PORTION PAID TO BROKERS IN SAME OFFICE -- TAX CONSEQUENCES.The measure of the tax on real estate commissions earned by a real estate broker who pays a portion to associate brokers in the same office on a particular transaction is the gross commission including that portion paid to associate brokers.Where the real estate broker has reported the gross commission for tax purposes, the associate brokers in the same office are not required to pay B&O tax on the payments received by them on the same transaction even if they as