EXEMPTION OF EXCISE TAX UPON TRANSFER OF VENDOR'S INTEREST IN REAL ESTATE, WHETHER ACCOMPLISHED BY ONE OR MORE INSTRUMENTS.
Such transaction is not subject to the Real Estate Sales Tax.
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January 22, 1952
Honorable Charles O. Carroll
Seattle 4, Washington Cite as: AGO 51-53 No. 220
Attention: !ttMr. K. G. Smiles,Chief Civil Deputy
You have requested our opinion on a question which may be paraphrased as follows:
Is the assignment of a vendor's interest in a contract to convey real property accompanied by a warranty deed subject to the Real Estate Sales Tax where the interest of the assignor in the land is as the vendee of an unperformed contract to purchase the property?
Our conclusion is that such a transaction is not subject to the Real Estate Sales Tax.
The Real Estate Sales Tax is imposed upon every "sale" of real property, but the statute expressly excludes the assignment of a vendor's interest in a contract to sell real property even though the assignment is accompanied by a deed of the assignor's remaining interest in the land. Section 1, chapter 19, Laws [[Orig. Op. Page 2]] of 1951, Second Ex. Sess. (Such an assignment would become taxable if the assignee subsequently obtained the contract vendee's interest through forfeiture.) For an extended treatment of the problem of such transfers of vendor's rights, see our opinion of November 13, 1951, to the prosecuting attorney of Franklin county [[Opinion No. 51-53-169]].
The instant problem is complicated because the assignor of the vendor's interest in the contract to convey is himself the vendee of a previously executed and still unperformed contract to purchase the same piece of property. His only interest in the land is as vendee of a separate and unperformed contract to purchase that piece of real property. Thus, A contracts to sell Blackacre to B, and B by a separate contract agrees to sell Blackacre to C; B then assigns his vendor's interest in the second contract to D, giving a warranty deed to Blackacre. The question is whether B'S assignment of his vendor's interest in this second contract, accompanied by a warranty deed to the property involved, is subject to the Real Estate Sales Tax.
Certainly, the assignment of the vendor's interest in the second contract constitutes the transfer of an interest in real property, and will be taxable under the definition given to the word "sale" in the statute and the ordinances in effect, unless the assignment comes within the aforementioned exception of assignments of vendor's interests in executory contracts. We believe that the transfer is not taxable, it coming within this express exclusion from the terms of the taxing statute.
If B, in the foregoing example, had performed the first contract by which he was purchasing the land, and had obtained title thereto prior to the entry of the second contract to sell the land, and had then assigned his vendor's interest therein giving a deed to the assignee, such transfer would be exempt under the terms of the statute. But where the interest of the vendor-assignor is only as a contract vendee he has even less interest in the land to transfer by the assignment and deed. By his agreement to sell he has divested himself of the same rights which any vendor having full title loses by such action; and because his contract to purchase is as yet unperformed, his interest is less than the normal vendor-assignor who owns the land. If the normal vendor-assignor comes within the exemption‑-as he does‑-then this vendor-assignor must fall within its terms.
We understand that it has been argued that the giving of the deed by one who is a contract vendee may result in a transfer of the interest of a contract vendee, which would be a taxable transfer. However, it is our opinion that the assignor has divested himself of so much of such rights as to reduce himself to the [[Orig. Op. Page 3]] status of one who has had equitable title to the real property. We believe that thoughtful analysis will show that the assignor is not assigningvendee's rights through the issuance of the deed because he has divested himself of such rights by the entry of the contract to sell the property, and that the rights assigned are only those of a contract vendor, expressly exempt by statute from the Real Estate Sales Tax.
Very truly yours,
C. JOHN NEWLANDS
Assistant Attorney General