Under current Washington law, the real estate excise tax (REET) rate is a flat 1.28% of the sales price of real property. Effective Jan. 1, 2020, ESSB 5998 made changes to the REET program creating a graduated rate structure as follows:

• 1.10% on the portion of the selling price that is $500,000 or below;
• 1.28% on the portion between $500,000 and $1.5 million;
• 2.75% on the portion between $1.5 million and $3 million; and
• 3.00% on the portion of more than $3 million

Agricultural land/timberland is excluded from the new rate structure and will continue to have the rate of 1.28%. This legislation does not affect local REET that should still be calculated in addition to the above rates.

In addition, REET is currently imposed on the transfer or acquisition of a controlling interest (50% or more) in an entity that owned real property in WA within a 12 month period. The new rules under ESSB 5998 expand the period to 36 months and change the reporting requirements during the annual corporate renewal cycle to disclose any transfers of 16% or more. If the entity fails to report the transfer and REET is due, the entity is liable for the REET plus a 50% evasion penalty.

Here is a link to the tax calculator download.

Our expert team of state and local tax professionals at Geffen Mesher is ready and prepared to help navigate these changes for your business.