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Real estate excise tax

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What is the real estate excise tax?

Real estate excise tax (REET) is a tax on the sale of real property.

Real property, or real estate, means any interest, estate, or beneficial interest in land or anything affixed to land, including the ownership interest or beneficial interest in any entity that owns land, or anything affixed to land, including standing timber and crops. See WAC 458-61A-102(18) for further information.

All sales of real property in Washington state are subject to REET, unless a specific exemption applies. Usually, the seller pays this tax, but if they don't, the buyer is responsible. If the tax isn't paid, it can create a lien on the property itself.

REET also applies when there’s a transfer of controlling interest in entities that own real property in the state. Controlling interest is a transfer of 50% or more of the entity’s ownership interest.

Definitions

Sale

A "sale" refers to any transaction where ownership or title to real estate, including standing timber, is transferred in exchange for valuable consideration.

This includes any agreement to transfer ownership, leases that include an option to buy the property, or contracts where the buyer takes possession of the property while the seller holds onto the title as security until the full payment is made. The term also includes the grant, relinquishment or assignment of a life estate in property, or the transfer of improvements constructed on lease land (WAC 458-61A-102(20)).

 

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 also includes the amount of any lien, mortgage, contract indebtedness or other encumbrance, that’s used to secure the purchase price or is still owed on the property at the time of sale.

For example, if Lee buys a house for $250,000, puts down $50,000, and takes out a $200,000 loan, the full amount of considered paid for the house is $250,000 (WAC 458-61A-102(3)).

REET applies when property is transferred, and the grantee (buyer) takes over the grantor's (seller's) debt on the property or makes payments on it. The tax is calculated based on the total of the underlying debt and any other consideration in the transaction (WAC 458-61A-103(1)).

Controlling Interest

In the case of a profit corporation, the term “controlling interest” means owning either 50% or more of the total voting power of all stock classes entitled to vote, or 50% of the capital, profits, or beneficial interest in the voting stock of the corporation.

In the case of any other corporation, partnerships, associations, trusts, or other entity, "controlling interest" means owning 50% or more of the capital, profits, or beneficial interest in that entity.

When someone transfers the controlling interest of an entity that owns real property in Washington state, it is treated as a taxable sale of that real property for the purposes of REET under Chapter 82.45 RCW (WAC 458-61A-101).

 

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 state, a controlling interest transfer return must be filed within five days of the completed transfer. If the return is not postmarked within 30 days of the transfer, penalties and interest will be charged.

For a controlling interest transfer, the "selling price" used to calculate the tax is the true and fair value of the real estate, including any leasehold improvements, owned by the entity at the time the transfer occurs.

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

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

Controlling Interest Taxable Transfer Period

The “taxable transfer period” is 36 months effective January 1, 2020.

To determine a 50% or more change in ownership interest, you need to look at all transactions within this period.

See ETA 3216.2019 for application of the 36-month transfer period.

Single Location Transfer

A "single location transfer" refers to a transfer where all the property is located within one local jurisdiction code. This could be one parcel or multiple parcels, as long as they are all in the same jurisdiction. For such sales, you need to complete the Single Location Affidavit.

Multiple Location Transfer

A "multiple location transfer" involves transferring multiple properties that are in different local jurisdiction codes, even if they are within the same county but in different local jurisdictions.

For these sales, you need to fill out the Multiple Locations Affidavit and Worksheet. You must submit a separate affidavit and a copy of the worksheet to each county involved.

Paying the tax

When is an affidavit required?

Affidavit - WAC 458-61A-303

Generally, you must file an affidavit whenever there is a transfer of ownership or title to real property by conveyance, deed, grant, assignment, quitclaim, or any other document that results in a transfer.

An affidavit is required in situations including, but not limited to:

  • Transfer establishing or separating community property.
  • Fulfillment of a settlement agreement due to a dissolution of marriage, legal separation, declaration of invalidity.
  • Fulfillment of a community property agreement.
  • Transfer resulting from a court order.
  • Transfer to secure a debt.
  • Transfer of a taxable easement.
  • A deed in lieu of foreclosure of a mortgage.
  • A deed in lieu or declaration of forfeiture of a real estate contract.
  • Transfer to or from the United States, the state of Washington, or any political subdivision or municipality of this state.
  • Transfer of development rights, water rights, or air rights.
  • Transfer of leasehold improvements.
  • Boundary line adjustments.
  • Rerecording a document to correct a minor error, such as the legal description or spelling of a name.
  • Transfer pursuant to a previously recorded transfer on death deed when the beneficiary(ies) perfect title by recording a certified copy of the transferor’s death certificate.


An affidavit is not required nor accepted for the following transactions including, but not limited to:

  • Transfer of cemetery lots or graves.
  • Transfer for assignment or release of security, stated on the face of the instrument.
    • To secure or assign a debt. 
    • To provide or release collateral.
  • A lease of real property that does not transfer lessee owned improvements. 
  • A mortgage or deed of trust, satisfaction of mortgage or reconveyance of a deed of trust. 
  • A seller's assignment of deed and contract. 
  • A fulfillment deed pursuant to a real estate contract. 
  • A community property agreement. 
  • Purchase of an option. 
  • An earnest money agreement. 
  • The recording of a transfer on death deed. 
  • The revocation of a transfer on death deed.
  • Inheritance of a community property interest or the transfer under a non-probated will in which a lack of probate affidavit is required. 
How to complete the affidavit?

Watch an instructional video:

Complete a single location affidavit

Complete a controlling interest affidavit

Complete a multiple locations affidavit

Affidavit - WAC 458-61A-303

REET Forms

You must submit the affidavit, conveyance document, and payment for a deeded transfer of property to the county treasurer in which the property is located.

How do I pay the tax?

REET is due and payable to the county treasurer in the county where the property is located on the date of sale, regardless of when the sale is recorded. The only exception is for controlling interest transfers, where different rules might apply.

Attention: Mailing the affidavit and deed to the Department of Revenue by mistake can delay the filing with the county. This could result in penalties and interest for not following the correct filing 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
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 effective Jan. 1, 2023 for the state portion of REET

For transfers Jan. 1, 2020 - Dec. 31, 2022 see the tax calculator above.

Sale price thresholds

Tax rate
$525,000 or less

1.10%
$525,000.01 - $1,525,000

1.28%
$1,525,000.01 - $3,025,000

2.75%

$3,025,000.01 or more

 3%
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) or Revised Code of Washington (RCW) including the section and subsection.

  • Example: WAC 458-61A-211(2)(g)

If claiming a gift exemption, you must submit a completed and executed REET Supplemental Statement 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, Exemption codes 1/1/2023 or after, and Exemption codes prior to 1/1/2023.

What exemptions are available?

There are limited exemptions to REET. Below is a list of the most commonly used exemptions. However, it is important you review the full text and examples prior to claiming an exemption.

REET exemptions (commonly used):

When is tax due?

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.

When do penalties and interest apply?
 

Delinquent penalty is due if the tax is not paid on time.         

  • 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.    

Contact DORStatistics@dor.wa.gov for periods not listed on this table. For additional information, see WAC 458-61A-306.

Calendar year

Assessment rate 

Refund rate
2025 7% 7%
2024 6% 6%
2023 3% 3%
2022 2% 2%
2021 3% 3%
2020 4% 4%
2019 4% 4%
2018 3% 3%
2017 3% 3%
2016 2% 2%
2015 2% 2%
    
What is special consideration for agriculture or timber land and predominate use?

Starting Jan. 1, 2020, sales of real property are subject to a graduated rate structure for the state portion of REET. However, sales of real property classified as "agricultural land”, or "timberland" (including structures) are considered classified land and will remain subject to a flat rate of 1.28% for the state portion of REET.

Land classifications are assigned by the county assessor in which the property is located. For additional information, contact the county assessor’s office.

Agricultural land must be classified as defined in RCW 84.34.020. Timberland must be classified under RCW 84.34 or designated under RCW 84.33. These classifications include the structures and timber on such land, as well as timber sold apart from the timberland.

For REET purposes, real property is only considered for the flat state tax rate if the buyer indicates it will continue to use the land in a qualifying manner and the county assessor approves the land for such continued use. The county assessor must sign the Notice of Continuance in section 6 of the affidavit. See ETA 3215.2020 for additional information.

Predominate use

For REET purposes, if a property has multiple uses, it's classified based on its predominant use. If you're selling multiple parcels where some are classified as "agricultural land" or "timberland" and others are not, you'll need to fill out a predominate use worksheet and include the worksheet with the affidavit.

If the sale involves different location codes and requires the predominate use worksheet, you need to complete the predominate use worksheet for all parcels in the sale first. This will determine the rate of the state portion of REET for the entire sale. After that, you will complete the multiple locations worksheet and complete a separate affidavit for each county where the property is located and include both worksheets with each affidavit.

How do I complete a refund request?

Refunds - WAC 458-61A-301

You may request a refund of REET paid. You must file the request within four years of the date of sale and must include documents to support the refund claim. An overpayment can only be refunded to the party who originally submitted the payment. You must provide proof of payment showing the identity of the original payor.

You must submit the refund request form and supporting documentation to the county treasurer for a deeded transfer. The treasurer will then submit to the department for processing.

A refund request related to a controlling interest transfer should be submitted directly to the department for processing.

The authority to issue a refund is limited to the following circumstances:

  1. REET was paid on the transfer back to the seller in a transaction that is completely rescinded.
  2. REET was paid on the transfer back to the seller on a sale rescinded by court order. A copy of the court decision is required to be attached.
  3. REET was paid on the initial transfer recorded in error by an escrow agent before the closing date, provided the property is conveyed back to the seller.
  4. REET was paid on the transfer back to the seller in #3.
  5. REET was paid on the initial transfer recorded before a buyer assumes an outstanding loan that represents the only consideration paid for the property if both of the following apply:
     
    • The buyer is not able to assume the loan.
    • The property is conveyed back to the seller. The refund is allowed because there is a failure of the consideration.
  6. REET was paid on the transfer back to the seller in #5.
  7. Double payment of REET.
  8. Overpayment of REET through error of computation.
  9. REET was paid when the taxpayer was entitled to claim a valid exemption but failed to do so at the time of transfer.

FAQ's

When am I required to file a controlling interest transfer return? (Secretary of State Annual Report)

You will have to submit the return if you answered “yes” to questions 1 AND 2a. If you answered no to either of these questions you will not have to submit the return.

image of controlling interest question within controlling interest transfer return
How can I make an electronic payment for my Controlling Interest Transfer Return?

Send an image of the executed Controlling Interest Transfer Return and all supporting documents by email to DORRealEstateExciseTax@dor.wa.gov, and let us know you are sending the payment separately by ACH Credit or Fed wire.

The department’s Electronic Payment Guide shows detailed instructions for submitting Automated Clearing House (ACH) Credit and Fed wire transfer payments.

When completing an ACH Credit Payment’s Addenda Record, use the following data to help us correctly apply your payment:

  • Item 5, Taxpayer identification, use the Real Estate Excise Tax Account number for the transferred entity, if known, or its UBI number.
  • Item 6, Reporting frequency, use “AA” for annual.
  • Item 8, Tax type code, use 20013 for REET.
  • Item 10, Tax period end date, use the Date of Transfer as reported in section 7 of the Controlling Interest Transfer Return.

If there is an opportunity to enter a custom note, use “REET” to help identify the payment.

When completing a Fed wire payment use the Real Estate Excise Tax Account number for the transferred entity, if known, or its UBI number. If there is a custom note or freeform addenda, use “REET” in that field.

My transfer may qualify under multiple exemptions. Should I list them all?

Only one exemption can be claimed per transfer.

What is the "lookback" period?

Beginning Jan. 1, 2020, the Legislature expanded the “lookback” period from 12 months to 36 months. Controlling interest transfers can occur over time and in stages through multiple sales. The “lookback” period is the timeframe over which multiple transfers are combined to determine whether a controlling interest has been transferred. See ETA 3216.2019 for additional information.

What should I do if my information will not fit in the REET affidavit?

Multiple grantors/grantees or parcel numbers/legal descriptions that do not fit on the allotted lines on the affidavit should be included on additional pages (exhibits) and submitted with the affidavit.

What should be used as the date of sale?

The date of sale is the date the conveyance document is executed and delivered to the grantee (buyer) or the grantee’s agent. Therefore, the date of sale is the date the deed is notarized. If a taxpayer disagrees, they must provide evidence to prove otherwise.

I received a letter notification that my transfer is under Audit. What should I do?

The most important thing to do is communicate with the examiner identified on the letter you received. Provide the information requested by the due date. If you can’t meet the due date in the letter or have questions about the requested documents, contact the assigned examiner to request clarification or an extension. If you authorize anyone else to communicate with the department on your behalf you must complete a confidential tax information authorization prior to the department releasing any confidential tax information.

Can a Power of Attorney (POA) sign REET documents?

The affidavit may be signed by an agent for the grantor or grantee. However, the supplemental statement (required for certain exemptions) must be signed by the grantor and grantee. A POA may sign the supplemental statement IF the documents appointing the POA allow for the transfer of real estate and the documents are provided to the county at the time of transfer.

What are the funds used for?

Beginning July 1, 2023, 1.3% of the state tax collected by counties is retained to cover administration costs.

Of the net proceeds to the state:

  • 5.2% goes to the public works assistance account.
  • 1.4% goes to the city-county assistance account.
  • 79.4% goes to the general fund.
  • The remaining amount goes to the education legacy trust account.

See RCW 82.45.230 for additional information.

What is the selling price for controlling interest transfers?

In the case of a controlling interest transfer, the “selling price” used to calculate the tax is the true and fair value of the real property, including any leasehold improvements owned by the entity when the controlling interest is transferred.

If the true and fair value can't be reasonably determined through a fair market value appraisal or the allocation of assets according to Section 1060 of the Internal Revenue Code, the property's market value listed in the county's property tax records at the time of sale will be used as the selling price (WAC 458-61A-101(4)).

 

Are electronic signatures valid?

Yes, electronic signatures are valid when proper authentication methods are used, such as the use of DocuSign. It is required that the verification page be kept on hand in the event further validation is needed. See RCW 1.80.060 for additional information.

What is the true and fair (market) value?

If property has been conveyed in an arm’s length transaction (a transaction resulting from good-faith bargaining between a buyer and seller who are not related), the market value is the amount of money that a buyer, who is willing but not obligated to buy, would pay a seller who is willing but not obligated to sell, 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.

How can I get updates regarding REET?

Sign up for email updates through GovDelivery.

What documentation is required to be kept?

All transactions are subject to audit by the Department of Revenue to confirm the proper amount of tax was paid and that any claim for exemption is valid. It is the taxpayer’s responsibility to provide documentation to support the selling price or any exemption claimed. This documentation must be maintained for a minimum of four years from the date of sale (RCW 82.45.100). Failure to provide documentation as requested may result in the denial of any exemptions claimed and the assessment of additional tax with applicable interest and penalties. WAC 458-61A-301(9)

Questions?

Please call 360-704-5905.