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No Excise Tax Due on Real Estate Wholesaler Assignments

When a Washington State wholesaler sells their buyer’s interest in a real estate sale agreement involving Washington State real property there is usually no excise tax due on the consideration. Generally, excise tax is due on the transfer of all Washington State real estate transfers. WAC 458-61A-100.

In real estate wholesaling, a wholesaler contracts a home with a seller, then finds an interested party to buy it. The wholesaler contracts the home with a buyer at a higher price than with the seller and keeps the difference as profit.  Real estate wholesalers generally find and contract distressed properties.

The Washington State Department of Revenue (“DOR”) has agreed there was no real estate excise tax due from either party on the amount of the “boot,” the amount paid by the assignee ultimate buyer to the assignor, the initial contract purchaser. The real estate excise tax was calculated based upon the price paid to the real estate owner, the seller, and the deed is that seller to the assignee. Literally, there is no sale of real property from the assignor to the assignee. Also, the sale is an assignment of an executory contract, not a sale of real property subject to excise tax.

WAC 458-61A-104

Assignments.

(1) Purchasers.

(a) The real estate excise tax does not apply to an assignment of a purchaser’s interest in an earnest money agreement if neither the earnest money agreement nor its assignment results in a change of title to or ownership of the real property.

(b) The real estate excise tax does apply to transfers when the purchaser of real property under a real estate contract assigns the purchaser’s interest in the contract for consideration. The tax is based on all consideration paid or contracted to be paid to the grantor for the assignment, including any unpaid principal balance due on the assigned real estate contract.

(2) Sellers. The real estate excise tax does not apply when a seller of real property under a real estate contract assigns any interest in the contract to a third party.

(3) Documentation. The real estate excise tax affidavit is not required for exempt assignments; however, the instrument of assignment must be stamped by the county treasurer as required by WAC 458-61A-301. The stamp will cross-reference the number of the affidavit relating to the contract being assigned.

[Statutory Authority: RCW 82.32.30082.01.060(2), and 82.45.150. WSR 05-23-093, § 458-61A-104, filed 11/16/05, effective 12/17/05.]

Disclaimer: The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.

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