CONSTITUTIONALITY OF REAL ESTATE SALES TAX ACT

CONSTITUTIONALITY OF REAL ESTATE SALES TAX ACT.

There is no unconstitutional delegation of authority to determine what is a real estate transaction in the real estate sales tax act.

                                                                 - - - - - - - - - - - - -

                                                                October 14, 1952 

Honorable Rueben C. Youngquist
Prosecuting Attorney
Skagit County
Mount Vernon, Washington                                                                                                              Cite as:  AGO 51-53 No. 418

 Attention:  Charles F. Stafford, Jr.

Dear Sir:

            Receipt is acknowledged of your letter of September 23, 1952, in which you request our opinion as to the legality of the delegation of power to boards of county commissioners to enact an ordinance providing for a real estate excise tax and in such ordinance to determine whether a particular transaction is a real estate transaction.

             It is our conclusion that chapter 11, Laws of First Ex. Sess. of 1951, as amended by chapter 19, Laws of Second Ex. Sess. of 1951.  (Chapter 28.45 RCW) contains no unconstitutional delegation of legislative authority relative to the determination of whether a particular transaction is a real estate transaction.

                                                                      ANALYSIS

             The real estate sales tax statute in section 7 (RCW 28.45.010) defines "sale" as follows:

             "As used in this chapter, the term 'sale' shall have its ordinary meaning and shall include any conveyance, grant, assignment, quitclaim, or transfer of the ownership of or title to real property, including  [[Orig. Op. Page 2]] standing timber, or any estate or interest therein for a valuable consideration, and any contract for such conveyance, grant, assignment, quitclaim, or transfer, and any lease with an option to purchase real property, including standing timber, or any estate or interest therein or other contract under which possession of the property is given to the purchaser, or any other person by his direction, which title is retained by the vendor as security for the payment of the purchase price.

             "The term shall not include a transfer by gift, devise, or inheritance, a transfer of any leasehold interest other than of the type mentioned above, the assignment or other transfer of a vendor's interest in a contract for the sale of real property, even though accompanied by a conveyance of the vendor's interest in the real property involved (but in any case where such contract is forfeited, foreclosed, or otherwise not performed, and the assignee thereby obtains the interest of the purchaser therein, a sale of real property shall then be deemed to have occurred), transfers by appropriation or decree in condemnation proceedings brought by the United States, the state, or a municipal corporation, a mortgage or other transfer of an interest in real property merely to secure a debt, or the assignment thereof, nor a transfer in compliance with the terms of any lease or contract upon which the tax as imposed by this chapter has been paid or where the lease or contract was entered into prior to the date this tax was first imposed, nor the sale of any grave or lot in an established cemetery, nor a sale by the United States or this state."

             The legislature has thus set out what it means by a real estate transaction.  Section 5 (RCW 28.45.060) requires that the real estate sales tax provided for in the act shall be levied upon each sale of real estate located within the county.  Thus, the statute requires that the tax be applicable to every sale as defined therein.  The Second Ex. Sess. of 1951, by section 3, chapter 19, added a new  [[Orig. Op. Page 3]] section, RCW 28.45.035, relative to determination of the selling price.  That section reads:

             "The board of county commissioners shall provide by ordinance for the determination of the selling price in the case of leases with option to purchase, and shall further provide that the tax shall not be payable, where inequity will otherwise result, until and unless the option is exercised and accepted.  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."

             By this section the legislature has authorized the boards of county commissioners to implement their ordinance by providing the method of determination of the selling price in the case of leases with option to purchase, and also authorizes them to provide that the tax shall not be payable where inequity would result after an option has been accepted.  Further, the commissioners are authorized to require suitable security for the tax under some circumstances and may require the determination of the selling price by an appraisal.  Section 11, Article XI of the Constitution authorizes counties to make such regulations as are not in conflict with general laws.  The legislature has expressly conferred upon county commissioners the authority to make such regulations in accordance with general law.  In the case ofMahler v. Tremper, 140 Wash. Dec. 373 [[40 Wn.2d 405]], in which the constitutionality of the real estate sales tax was upheld by our Supreme Court, the contention was raised that there was an unconstitutional delegation of legislative authority to the county commissioners.  The Supreme Court did not specifically discuss this point.  However, they concluded their opinion by saying:

              [[Orig. Op. Page 4]]

            "We have discussed a number of contentions of appellant which we regard as the most significant relative to the alleged unconstitutionality and invalidity of chapter 11.  Appellant's other contentions have been considered.  We are not convinced of the soundness of appellant's attack upon chapter 11, and the judgment of the trial court will stand affirmed."

             However, in the course of the opinion the court referred to what it called "several basic principles of law."  In so doing it set out a quotation fromState ex rel. King County v. State Tax Commission, 174 Wash. 336, 341, 24 P. (2d) 1094, which concluded:

             "Since the legislature had the power of taxation, it follows that it might confer such power upon such agencies as it deemed fit and proper for the valuation and equalization of inter-county properties.  * * *"

             The court thus again approved the principle that the legislature can confer upon a designated agency, in this case a county, powers to implement the statute of the legislature.  At the time that the case of Mahler v. Tremper, supra, was argued in the Supreme Court the legislature had enacted chapter 19, Laws of Second Ex. Sess. of 1951 and the whole matter was before the court.  We believe the decision in that case approved the constitutionality of the act in its entirety including any delegation of power to the county commissioners.

 Very truly yours,
SMITH TROY
Attorney General

LYLE L. IVERSEN
Assistant Attorney General