TAXATION ‑- REAL ESTATE SALES TAX ‑- SALES IN LIEU OF CONDEMNATION

TAXATION ‑- REAL ESTATE SALES TAX ‑- SALES IN LIEU OF CONDEMNATION.

A sale of real property or an easement for a valuable consideration, even when the sale is made and the price agreed upon under the pressure of condemnation proceedings as the alternative, is subject to the real estate sales tax imposed by the model ordinance enacted by most counties, as authorized by chapter 11, Laws of 1951, Ex. Sess.

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                                                                   May 29, 1951

Honorable Ole H. Olson
State Representative
Sixteenth District
P.O. Box 222
Pasco, Washington                                                                                                     Cite as:  AGO 51-53 No. 59

Dear Mr. Olson:

            We have your request for our opinion interpreting the new tax on real estate transactions as to the following:

            1. Where the United States Government, or an agency thereof, intends to acquire title to certain privately owned real property, and will condemn, if necessary, is a conveyance by the owner to the Federal agency for a price established by appraisal subject to the real estate sales tax imposed by the county?

            2. Where the State of Washington or the county intends to acquire a right of way over certain privately owned real property, and will condemn the same, if necessary, is a conveyance of such an easement by the owner for a price agreed upon by negotiation (but under the pressure of alternative condemnation) subject to the real estate sales tax imposed by the county?

            Our conclusions may be summarized as follows:

             [[Orig. Op. Page 2]]

            A sale of real property or an easement for a valuable consideration, even when the sale is made and the price agreed upon under the pressure of condemnation proceedings as the alternative, is subject to the real estate sales tax imposed by the model ordinance enacted by most counties, as authorized by chapter 11, Laws of 1951, Ex. Sess.

                                                                     ANALYSIS

            By chapter 11, Laws of 1951, Ex. Sess., the legislature empowered counties

            "* * * to levy an excise tax upon sales of real estate not exceeding one per cent of the selling price."  (Sec. 2.)

            Section 5 of the act provides:

            "The real estate sales tax provided for herein shall be levied upon each sale of real property located within the county."

            Although the statute defines certain terms used and makes other provisions regarding the tax to be imposed, the statute itself is only an enabling act and we must look to the terms of the ordinance of each county to determine the particulars of each county's tax.

            We are informed that all the counties of the state have a real estate sales tax effective during the month of May 1951, each county having enacted a model ordinance prepared for them by their county commissioners' association.  Therefore, in dealing with your question we will construe the terms of the model ordinance, assuming the same to be in effect in the counties covered by your questions.

            The answer to each of your questions is determined by the definition of the term "sale" found in section 1 of the model ordinance.  Bearing in mind that section 5 of the statute states that the tax must be imposed upon "each sale of real property located within the county," the term "sale" is so defined in the ordinance that it is difficult to conceive of any transaction within the normal and ordinary meaning of that word which is not included.  The definition provides, in part, as follows:

            "'Sale' shall have its ordinary meaning and shall in addition include any conveyance, grant, assignment, quit-claim [[quitclaim]], or  [[Orig. Op. Page 3]] transfer of ownership of or title to real property or any estate or interest in real property for a valuable consideration * * *."

            Specifically excluded from the term are transfers by gift, devise or inheritance, mortgages and similar security instruments, transfers in compliance with a contract already subjected to the tax, transfers pursuant to contracts entered prior to the effective date of the ordinance, and the sale of any grave or lot in an established cemetery.

            We must conclude that where an owner of land conveys title to the same, or to an easement therein, to the United States, the State of Washington, or to the county in return for a valuable consideration, even though such transfer is under the pressure of condemnation proceedings as an alternative, such transaction is a "sale" within the definition of that term in the ordinance (as well as in the statute).  We are aware that the sale might never have occurred were it not for the power of condemnation lying in the public body.  There may be about the transaction nothing which is voluntary.  However, chapter 11 requires that each sale be subjected to such a tax, and the term "sale" is defined in both the ordinance and the statute so broadly as to include any type of transfer of title to real property or any interest therein for a valuable consideration.

            We note that the consideration for the transfer of the real property in the case of sales to the Federal agencies is determined by an appraiser, and that the parties do not bargain as to the purchase price.  We do not deem this feature to be of any significance in the determination of whether the tax applies, there being no question but that a "valuable consideration" passes in the transaction.

            Nor is there any question in the second type of sale because the interest transferred is only an easement.  The tax applies to the "transfer of ownership of title to real property or any estate or interest in real property," and it is well settled that an easement is an interest in real property.

            Inasmuch as there is no exemption provided for sales to the United States, the State of Washington, or to any other particular type of purchaser, these sales are not entitled to exemption because of that feature.

             [[Orig. Op. Page 4]]

            We wish to point out that you have not presented the question of whether the transfer of title to real property or an interest therein as a result of a decree in condemnation proceedings would be subject to this tax, and we have not passed thereupon.

Very truly yours,

SMITH TROY
Attorney General

C. JOHN NEWLANDS
Assistant Attorney General