APPLICATION OF REAL ESTATE SALES TAX ON STANDING TIMBER.
Sales of standing timber occurring prior to September 6, 1951, are taxable as sales of real estate unless the terms of the sale required the immediate severance of the timber. Sales made after September 6, 1951, which pass the title to standing timber are all taxable as real estate sales.
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February 5, 1952
Honorable Reuben C. Youngquist
Mt. Vernon, Washington Cite as: AGO 51-53 No. 234
This office has received requests for an opinion relative to the application to standing timber of the real estate sales tax, chapter 11, Laws of First Ex. Sess. of 1951, from you and several other prosecuting attorneys. We hope that this opinion will serve to answer the questions submitted by the various prosecuting attorneys making inquiry.
Our conclusions may be summarized as follows:
Subsequent to the effective date of chapter 19, Laws of Second Ex. Sess. 1951, which was September 6, 1951, all sales which accomplish the passing of title to standing timber prior to its severance are taxable under chapter 11 of the First Ex. Sess. of 1951. With reference to sales prior to September 6, 1951, sales of timber separate from the land requiring immediate severance, are not taxable as sales of real estate but all sales of standing timber, not for immediate severance are taxable as sales of interest in real estate.
Chapter 11, Laws of First Ex. Sess. of 1951 (RCW 28.45.010 et seq.) provides for a tax of one percent to be levied upon all sales of real estate when the commissioners of any county shall, by ordinance, so prescribe. All of the counties have taken action to put this tax into effect. The term "sale" was defined in section 7 of the original act as follows:
"As so used, the term 'sale' shall have its ordinary meaning and shall include any conveyance, grant, assignment, quit-claim, or transfer of the ownership of or title to real property or any estate or interest in real property for a valuable consideration, and any contract for such conveyance, grant assignment, quit-claim [[quitclaim]], or transfer, and any lease with an option to purchase real property or any estate or interest in real property or other contract under which possession of the property is given to the purchaser, or any other person by his direction, while title is retained by the vendor as security for the payment of the purchase price.
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This definition as contained in the original statute included a conveyance of "any estate or interest in real property for a valuable consideration." This presented a question whether the sale of timber separate from land should be regarded as an interest in land. This is a question upon which the decided cases in this state are somewhat confusing. Compare: Brodack v. Marsbach, 38 Wash. 72, 80 Pac. 275; France v. Deep River Logging Company, 79 Wash. 336, 140 Pac. 361;Nelson v. McKinney, 163 Wash. 529, 1 P. (2d) 876;Elmonte Investment Company v. Schafer Bros. Logging Company, 192 Wash. 1, 72 P. (2d) 311.
For the purposes of the assessment of ad valorem taxes the legislature has by statute defined real property to include
"* * * all standing timber growing thereon, except standing timber owned separately from the ownership of the land upon which the same may stand or be growing; * * *" Sec. 3, chapter 130, Laws of Ex. Sess. of 1925 (Rem. Rev. Stat. § 11108)
For the purposes of ad valorem taxes the legislature has defined "personal property" to include:
" * * * all standing timber held or owned separately from the ownership of the land on which it may stand; * * *" Sec. 4, chapter 130, Laws of Ex. Sess. of 1925 (Rem. Rev. Stat. § 11109)
These definitions, however, do not settle the question of what constitutes an interest in land for excise tax purposes.
There is no doubt that wherever the ownership of standing timber is in the person who owns the land, the timber is a part of the land on which it stands. Bennett v. Grays Harbor County, 15 Wn. (2d) 331, 130 P. (2d) 1041. When the timber is held separately, it partakes of both the character of personal and real property. The general rule is that timber, while standing is real property, but upon severance it becomes personal property. However, it has frequently been contended that a conveyance of standing timber for purposes of cutting and removing converts the timber into personal property and that the conveyance is thus one of personal property. If this were so, the sale of standing timber would be a conveyance of personal property and as such would not be subject to the tax in question. The latest of the Washington cases which have dealt with this contention has held that
"* * * a conveyance of standing timber, with the right of entry upon the land and removal of the timber therefrom in the future, whether the time of removal be measured by stated or reasonable time, is the conveyance of an interest in real property." Elmonte Investment Company v. Schafer Bros. Logging Company, 192 Wash. 1, 72 P. (2d) 311. See alsoFrance V. Deep River Logging Company, 79 Wash. 336, 140 Pac. 361.
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In some of the previous cases and in some of the cases from other states there appears to be a distinction between the status of timber where it is sold for removal within a definite time or within a reasonable time after the sale and those cases in which there is no such stipulation for removal. The latest pronouncement in our court is
"Standing trees are real estate unless they have been sold with an intention of immediate severance from the soil. * * *" Elmonte Investment Company v. Schafer Bros. Logging Company, 192 Wash. 1, 72 P. (2d) 311.
In the case just cited it was specifically held that a sale of timber where immediate removal was not required amounted to a sale of an interest in land.
It is, therefore, our conclusion that any sale of timber which passes title while the trees are still standing is a sale of an interest in real estate unless it is specifically required by the terms of the sale that the trees be immediately removed. Any such sale of an interest in land is taxable under the original provisions of chapter 11, Laws of First Ex. Sess. of 1951.
In the Second Extraordinary Session of 1951, the legislature amended the definition of the term sale by section 1, chapter 19, Laws of Second Ex. Sess. of 1951, so that the section now reads in part:
"As used in this chapter the term 'sale' shall have its ordinary meaning and shall include any conveyance, grant, assignment, quit-claim [[quitclaim]]or transfer or the ownership of or title to real property, including standing timber, or any estate or interest therein for a valuable consideration. * * *" (Emphasis supplied)
The legislature, apparently aware of the uncertainty as to whether sales of standing timber should be included within the real estate sales tax undertook to remedy this deficiency. Thus it has specifically indicated that transfers of ownership of standing timber are real estate sales for the purposes of the statute. Taking this amendment then to mean what it says, it is our opinion that after the effective date of chapter 19, Laws of Second Ex. Sess. of 1951, which was September 6, 1951, all sales which will pass the title of unsevered timber are taxable irrespective of whether it is intended to sever the timber immediately or to leave it upon the land.
It should be noted that what we have said applies to sales which pass title while the timber is standing. All sales of timber are not of this type. For example, the owner of timber might license the vendee to go upon his land for removing timber and arrange for delivery of title only after severance, as, for example, when scaled at the mill. The question of whether the sale is one of standing timber or one of severed timber is one of fact which must be determined from all of the circumstances.
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Upon the question of how the tax is to be paid in cases where the selling price is to be determined at some time after the original transaction occurs, the original statute, chapter 11, Laws of First Ex. Sess. of 1951, in section 12 provided that the board of county commissioners should prescribe the manner in which sales of real property shall be reported to the county treasurer and the tax paid thereon. The authority of the county commissioners is supplemented in section 3, chapter 19, Laws of Second Ex. Sess. of 1951, by the addition of the following:
"* * * The board shall further provide by ordinance for cases where the selling price is not separately stated or is not ascertainable at the time of sale, for the payment of the tax at a time when the selling price is ascertained, in which case suitable security may be required for payment of the tax, and may further provide for the determination of the selling price by an appraisal by the county assessor, based on the full and true market value, which appraisal shall beprima facie evidence of the selling price of the real property."
In view of the discretion reposed in the county commissioners under these statutes it is not within the scope of an opinion of this office to prescribe how these difficulties shall be resolved.
Very truly yours,
LYLE L. IVERSEN
Assistant Attorney General