Could a Washington county redefine a real-estate sale to exempt transfers into a corporation partly owned by the transferor?

Plain-English summary

The Washington Attorney General concluded in 1963 that county commissioners could not use an ordinance or resolution to change the statutory definition of a real estate “sale” to exempt a transfer to a corporation in which the property owner held more than a designated share of stock. Counties had authority to levy the excise tax on sales within statutory limits, but the Legislature had not delegated a general power to make new exemptions.

The opinion emphasized that a grant of taxing power did not include a power to exempt transactions. It identified only an express exemption authority for certain leases with purchase options in the statute then in force and said counties could not add a corporate-transfer exception of their own.

Currency note

This opinion was issued in 1963. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: Could county commissioners create the proposed corporate-transfer exemption?
A: No. The AG said they lacked statutory authority to alter the tax’s definition of a sale in that way.

Q: Did county power to impose the tax include power to exempt sales?
A: No. The opinion treated exemption authority as requiring an express legislative grant.

Q: Did the opinion decide every transfer to a partly owned corporation was taxable?
A: It addressed the county’s inability to create a new exemption. The statutory definition and any legislative exceptions controlled the tax analysis.

Background and statutory framework

The opinion discussed the county levy power in RCW 28.45.050, the tax on each sale in RCW 28.45.060, the sale definition in RCW 28.45.010, and an express exception in RCW 28.45.035. It relied on the rule that counties have only tax powers delegated by the state.

Citations and references

The opinion discusses RCW 28.45.050, RCW 28.45.060, RCW 28.45.010, and RCW 28.45.035.

Source

• Landing page: https://www.atg.wa.gov/ago-opinions/taxation-real-estate-excise-tax-sale-authority-county-commissioners-alter-definition

Original opinion text

Attorney General John J. O'Connell

TAXATION ‑- REAL ESTATE EXCISE TAX ‑- SALE ‑- AUTHORITY OF COUNTY COMMISSIONERS TO ALTER DEFINITION.

The board of county commissioners does not have the authority by ordinance or resolution to alter the definition of "sale" as it appears in chapter 28.45 RCW so as to exempt a transfer by a property owner to a corporation in which he holds more than a designated portion of the capital stock.

July 25, 1963

Honorable R. DeWitt Jones
Prosecuting Attorney
Clark County
301 Court House
Vancouver, Washington

Cite as: AGO 63-64 No. 40

Dear Sir:

By letter previously acknowledged you have requested an opinion from this office on a question concerning the real estate excise tax.

Specifically, you ask whether the county commissioners may, by ordinance or resolution, alter the definition of a "sale" as it appears in chapter 28.45 RCW, to exempt a transfer by a property owner to a corporation in which he holds more than a designated portion of the capital stock.

We answer your question in the negative.

ANALYSIS

Counties are authorized to impose by ordinance an excise tax upon real estate sales in an amount not exceeding one percent of the selling price (RCW 28.45.050). It is expressly provided that the tax shall be levied upon "each sale" of real property within the county (RCW 28.45.060).

The term "sale" is defined by RCW 28.45.010, and there is no express legislative authority granted a county to exempt any sales from the tax except as may be found in RCW 28.45.035 with respect to leases with option to purchase. See, AGO 59-60 No. 100 [[to Prosecuting Attorney, Pacific County on February 10, 1960]].

[[Orig. Op. Page 2]]

It is a fundamental rule that counties have only such powers in matters of taxation as the state has delegated to them. Great Northern R. Co. v. Stevens County, 108 Wash. 238, 183 Pac. 65 (1919);State ex rel. School Dist. v. Clark County, 177 Wash. 314, 31 P.2d 897 (1934). As stated inVance Lumber Co. v. King County, 184 Wash. 402 51 P.2d 623 (1935), at page 409:

"The state is sovereign in matters of taxation. The counties are creatures of the state and may enjoy and exercise only such rights, powers and privileges as the state accords to them. Tacoma v. State Tax Commission, 177 Wash. 604, 33 P.2d 899."

Power to tax delegated by the state does not include the power to exempt, and governmental subdivisions of the state do not have such power except as the same is expressly granted. 2 Cooley, Taxation, § 670 (4th ed.).

Moreover, RCW 28.45.110 is indicative of legislative intent not to permit counties to formulate exemptions from the tax. This section provides that if the tax is levied and a certain amount of money is not realized from such levy, the deficit will be a charge against the general fund of the state. The more "sales" made nontaxable the greater could be the burden on the state general fund. We think it highly unlikely that the legislature intended that the counties should have a discretionary power to determine the size of this burden on the state general fund by exempting certain types of sales.

We are therefore of the opinion that the county commissioners have no authority to exempt any real estate sales from the tax other than those sales expressly exempted by the legislature in chapter 28.45 RCW.

Very truly yours,

JOHN J. O'CONNELL
Attorney General

HENRY W. WAGER
Assistant Attorney General