Real estate excise tax

What is the real estate excise tax?

Real estate excise tax (REET) is a tax on the sale of real property. All sales of real property in the state are subject to REET unless a specific exemption is claimed. The seller of the property typically pays the real estate excise tax, although the buyer is liable for the tax if it is not paid. Unpaid tax can become a lien on the transferred property.

REET also applies to transfers of controlling interest (50% or more) in entities that own real property in the state.

Paying the tax

Program changes, effective Jan. 1, 2020

ESSB 5998 required the department to:

Create a graduated state REET rate structure for sales of real property. Update controlling interest transfers (50% or more change of ownership in an entity that owns real property).

Expand the transfer period from 12 months to 36 months.
Modify the reporting requirements during the annual corporate renewal cycle to disclose any transfers of 16% or more.

For more information, see the section below titled: What rate do I pay?

What rate do I pay?

Effective Jan. 1, 2020, ESSB 5998 made changes to the real estate excise tax program. Some of these changes include:

A graduated state REET rate structure for sales of real property.

Exception: Agricultural land/timberland is excluded from the new rate structure and will continue to have a state REET rate of 1.28%.

Updates for controlling interest transfers (50% or more change of ownership in an entity that owns real property).

Expands the transfer period from 12 months to 36 months.
Changes the reporting requirements during the annual corporate renewal cycle to disclose any transfers of 16% of more.

Attention: The local REET must be calculated and added to the graduated state rate for the total tax due.

Resources

Graduated REET Structure

Sale price thresholds	Tax rate
$500,000 or less	1.10%
$500,000.01 - $1,500,000	1.28%
$1,500,000.01 - $3,000,000	2.75%
$3,000,000.01 or more	3%

Calculating the graduated state real estate excise tax:

Example A:

If the total sale price is $600,000, then the first $500,000 is taxed at 1.10%. The remaining $100,000 is taxed at 1.28%.

$500,000 x 1.10% =	$5,500
$100,000 x 1.28% =	$1,280
Total taxes	$6,780

Example B:

If the total sale price is $4.4 million, then the first $500,000 is taxed at 1.10%. The next $1 million is taxed at 1.28%. The next $1.5 million is taxed at 2.75% and the final $1.4 million is taxed at 3%.

$500,000 x 1.10% =	$5,500
$1,000,000 x 1.28% =	$12,800
$1,500,000 x 2.75% =	$41,250
$1,400,000 x 3% =	$42,000
Total taxes	$101,550

When is the tax due and when do penalties and interest apply?

On a “deeded transfer” (where a conveyance document transfers title to real property at the county treasurer’s office) REET is due on the date of sale regardless of the date of recording. Penalty and interest are due if the tax is not paid within one month of the date of sale.

A $5.00 state technology fee is applied to the total due for every transfer.
An additional $5.00 affidavit processing fee is applied if an exemption is claimed for the total tax due.
A minimum of $10.00 is due in fees(s) and/or tax.

On a controlling interest transfer, REET payment must be postmarked within five days from the date of transfer. Penalties and interest are due if the tax is not postmarked within one month of the date of sale.

Penalties & interest

Delinquent penalty is due if the tax is not paid timely as noted above.

After one month from the date of sale, a penalty of 5% of the amount of the tax due.
After two months from the date of sale, an additional penalty of 5% of the tax due (total of ten percent).
After three months from the date of sale, an additional penalty of 10% of the tax due (total of 20 percent).

If the tax is not paid within one month of the date of sale, interest will be imposed on the total amount of the unpaid tax from the date of sale to the date of full payment. Interest is calculated on a monthly basis with a full month’s interest accruing at the beginning of each month. Interest rates for REET

For additional information, see WAC 458-61A-306.

How do I pay the tax?

REET is due and payable to the county treasurer in which the property is located on the date of sale, regardless of the date of recording except in a controlling interest transfer.

Attention: If the affidavit and deed are mailed to the Department of Revenue in error, it could delay the filing at the county and penalties and interest may apply as the result of failure to follow instructions.

County assessor and treasurer websites

Controlling interest transfer returns and payment should be mailed directly to the department at the address on the top left corner of the return.

Washington State
Department of Revenue
Taxpayer Account Administration
PO Box 47464
Olympia, WA 98504-7464

For courier delivery:

Department of Revenue REET
Attn: Treasury Management
6500 Linderson Way SW, Ste 227
Tumwater, WA 98501-6561

How do I claim an exemption?

There are limited specific exemptions available for REET. To claim an exemption, list the exemption code in section 7 of the REET Affidavit. The exemption code must reference the Washington Administrative Code (WAC) including the section and subsection.

Example: WAC 458-61A-211(2)(g)

If claiming a gift exemption, a completed REET Supplemental Statement is required and must be submitted with the affidavit. The section and subsection claimed is based on the selection chosen on the supplemental statement.

For more information, see the complete list of exemptions in WAC 458-61A and valid exemption codes.

Definitions

What is considered a sale?

A sale means, any conveyance, grant, assignment, quitclaim, or transfer of the ownership of or title to real property, including standing timber, or any estate or interest therein for a valuable consideration, and any contract for such a conveyance, grant, assignment, quitclaim, or transfer, and any lease with an option to purchase real property, including standing timber, or any estate or interest therein or other contract under which possession of the property is given to the purchaser, or any other person at the purchaser's direction, and title to the property is retained by the vendor as security for the payment of the purchase price. The term includes the grant, relinquishment, or assignment of a life estate in property. The term also includes the grant, assignment, quitclaim, sale, or transfer of improvements constructed upon leased land. WAC 458-61A-102(20)

What is consideration?

Consideration means money or anything of value, either tangible or intangible, paid or delivered, or contracted to be paid or delivered, including performance of services, in return for the transfer of real property. The term includes the amount of any lien, mortgage, contract indebtedness, or other encumbrance, given to secure the purchase price, or any part thereof, or remaining unpaid on the property at the time of sale. For example, Lee purchases a home for $250,000. He puts down $50,000, and finances the balance of $200,000. The full consideration paid for the house is $250,000. WAC 458-61A-102(3)

The real estate excise tax applies to transfers of real property when the grantee relieves the grantor from an underlying debt on the property or makes payments on the grantor's debt. The measure of the tax is the combined amount of the underlying debt on the property and any other consideration. WAC 458-61A-103(1)

What is a controlling interest transfer?

A controlling interest transfer occurs when there is a 50% or more change of ownership in an entity. If that entity owns real property in Washington, a controlling interest transfer return is required to be completed within 5 days of the completed transfer. Penalties and interest will apply if the return is not postmarked within 30 days of the completed transfer.

What is an entity? See WAC 458-61A-101(2)(a)

The measure of the tax is the “selling price”. In the case of a controlling interest transfer the “selling price” means the true and fair value of the real property (to include leasehold improvements) owned by the entity at the time the controlling interest is transferred.

What is true and fair value?

If property has been conveyed in an arm’s length transaction between unrelated persons, the market value is the amount of money that a willing, but unobliged, buyer would pay a willing, but unobligated, owner for real property, taking into consideration all reasonable, possible uses of the property. When the true and fair value of the property can’t be reasonably determined, the market value assessment for the property maintained in the county property tax roll at the time of sale will be used as the selling price.

The “taxable transfer period” is either 12 months or 36 months. 50% or more change of ownership interest is determined by taking into account all transactions within the “taxable transfer period”. The 36 month period is effective January 1, 2020. See ETA 3216.2019 for application of the 36 month transfer period.

For additional information see WAC 458-61A-101.

What is the difference between single location vs. multiple location transfer?

A single location transfer means a transfer in which the property is located in one local jurisdiction code. This may be a single parcel or multiple parcels as long as all parcels are in the same local jurisdiction. For sales in a single local jurisdiction, complete the Single Location Affidavit.

A multiple location transfer involves the transfer of multiple properties in different local jurisdiction codes. This includes parcels in the same county but different local jurisdictions within the county. For sales in multiple local jurisdictions, complete the Multiple Locations Affidavit and Worksheet. A separate affidavit with a copy of the worksheet must be completed and remitted to each county.