[WSBARP] City tax on real estate sales

Tue Jul 19 11:09:23 PDT 2016

I agree with this with one exception.  I believe only the Supreme Court can license attorneys and as a result I have always thought that a city could not demand a license of a law firm.  3rd branch of government violation?

Josh

Joshua F. Grant, PS
Attorney at Law
P. O. Box 619
Wilbur, WA 99185
tel 509 647 5578
fax 509 647 2734

From: scott scottgthomaslaw.com 
Sent: Monday, July 18, 2016 9:10 PM
To: WSBA Real Property Listserv 
Subject: Re: [WSBARP] City tax on real estate sales

It's an excellent question.  And I am hoping that somebody smarter than I am will be able to answer it.  Preferably somebody with a background in taxation.  For the time-being, I think the starting point is that local governments may impose regulatory fees under their police powers so long as the subject matter is local.  And the scope of police power is broad, so long as the subject of the regulation (and the corresponding fee) bears a "reasonable and substantial relation to promotion of the general welfare of the people."  Business license are regulatory by nature - local governments use them as a vehicle to regulate land use, fire code enforcement, and other subjects (think marijuana sales, for example.)  On the other hand, local governments may impose a tax only pursuant to specific and explicit legislative or constitutional authority.  We know all of this because of Covell v. City of Seattle, 127 Wn.2d 874, 905 P.2d 324 (1995).  Covell cites three factors to decide if a charge is a fee or a tax, and its progeny have tried to explain what Covell really meant.  But I think it really comes down to location.  So if the business activity is predominantly taking place within a local government's boundaries, the activity is subject to local regulation, and may be licensed.  In other words, a lawyer or an accountant who has an office within Tacoma City limits will need a business license, while a lawyer or accountant who only has a client - but not an office - will not need a local business license.  On the other hand, an electrician who provides services within the city will need a license even though the electrician does not have a shop in town, but the electrician driving into town to pick up electrical supplies will not need a license so long as no physical labor is performed.  And I'm not sure how FedEx or UPS fits into the equation, or lawyers who travel to a distant courthouse to argue a case.  Or whether independent contractors, such as real estate brokers, should each have an individual business license.

  On July 18, 2016 at 5:47 PM "Douglas W. Scott" <doug at davisscottlaw.com> wrote:

  Thanks for your reply. The excise tax will be levied on the location of the property.  As to the need to register to do business in Tacoma, by analogy, if I represent a business in Tacoma and provide legal advice concerning that business, should I have to register to do business in Tacoma? Or if a Puyallup electrician works on a Tacoma home, is he required to register in Tacoma? 

  Douglas W. Scott

  Law Offices of Douglas W. Scott

  Windermere Building

  1810 15th Place NW, Suite 203
  Issaquah, Washington, 98027
  V.  425.392.8550
  F.  425-392-2829 

  www.davisscottlaw.com

  From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of scott scottgthomaslaw.com
  Sent: Monday, July 18, 2016 5:09 PM
  To: WSBA Real Property Listserv
  Subject: Re: [WSBARP] City tax on real estate sales

  Yes, a city may require a license to conduct business within its jurisdiction.  RCW 35.22.280 (32).  Tacoma is a first class city.  There are two real estate excise taxes that may be levied by local government - REET 1 and REET 2 - pursuant to RCW 82.46.010 and 035.  There is no authority to tax real estate commissions, which sounds suspiciously like an income tax.

    On July 18, 2016 at 3:58 PM "Douglas W. Scott" <doug at davisscottlaw.com> wrote:

    I represent a real estate company outside of Tacoma.  Tacoma saw a For Sale sign from my client within their city limits and has said that all persons that engage in business in Tacoma must apply for a city business license. I imagine that in addition to a fee for this license they will want to charge a city tax on whatever commissions are derived from a real estate sale. My client has no office within Tacoma. Can Tacoma do that?

    Douglas W. Scott

    Law Offices of Douglas W. Scott

    Windermere Building

    1810 15th Place NW, Suite 203
    Issaquah, Washington, 98027
    V.  425.392.8550
    F.  425-392-2829 

    www.davisscottlaw.com

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