Washington State

Office of the Attorney General

Attorney General

Bob Ferguson

AGO 1952 No. 446 -
Attorney General Smith Troy


The county real estate sales tax is imposed upon the transfer of real property back to industrial development districts for condition of particular use broken pursuant to statute and/or deed.

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                                                               December 22, 1952 

Honorable John J. O'Connell
Prosecuting Attorney of Pierce County
Court House
Tacoma, Washington                                                                                                              Cite as:  AGO 51-53 No. 446

 Attention:  Civil Department

 Dear Sir:

             You request our opinion whether

             the revocation by Industrial Development Districts of a sale of real property to a purchaser who fails to devote the property to its intended use is subject to the real estate sales tax.

             We conclude:

             The tax applies and is measured by the purchase price returned.


             (1) Application of Constitution:  Municipal corporations are exempt fromad valorem or property taxes, Wash. Const. Art. VII, section 2, 14th Amendment,  [[Orig. Op. Page 2]] but as shown by its title, "Excise Tax on Real Estate Sales," RCW chapter 28.45, this is an excise rather than a property tax and thus the constitutional exemption does not apply.  State v. Collins, 94 Wash. 310, 312, 162 Pac. 556 (1917); Mahler v. Tremper, 40 Wn. (2d) 405, 253 P. (2d) 627 (1952).

             (2) Application of Tax Statute:  All sales by or to municipal corporations are taxable except when by appropriation or condemnation proceedings.  RCW 28.45.010 excludes from the definition of taxable sale:

             "appropriation or decree in condemnation proceedings brought by the United States, the state, or a municipal corporation,"

             Sales by

             "the United States or this state"

             are also excluded but not sales by municipal corporations.  Although municipal corporations are often termed "arms of the state," Batchelor v. Madison Park Corp., 25 Wn. (2d) 907, 172 P. (2d) 268 (1946), they are not included in the statutory exemption here granted to the state.  First, only their appropriation and condemnation proceedings are exempted, and second, the term taxable "seller"

             "means any * * * municipal corporation, quasi-municipal corporation * * * but it shall not include the United States or state of Washington."  RCW 28.45.020.

             The method by which the Port of Tacoma obtained the return of its interest in land is neither appropriation or condemnation.  These terms describe the power of eminent domain, Title 8 RCW.  The exercise of the Power of revocation involved herein is granted both by separate statute and the limiting language of the deed itself.

             (3) Transfer:  The Port of Tacoma, pursuant to chapter 53.28 RCW, conveyed certain of its lands for "commercial and/or industrial purposes" to an industrial purchaser.  The conveyance was subject to statutory limitation.  RCW 53.28.060.

             "Devotion of property to intended use‑-Remedy. The purchaser shall, within one year from the date of purchase, devote the property to its intended use,  [[Orig. Op. Page 3]] or shall commence work on the improvements thereon to devote it to such use, and if he fails to do so, the commission may cancel the sale and return the money paid on the purchase price, and title to the property shall revert to the district.  This remedy shall be in addition to any other remedy under the terms of the sale.  No purchaser shall transfer title to such property within one year from the date of purchase."

            Thus, a limited fee was transferred subject to a statutory condition subsequent, sometimes also called a right of entry for condition broken or power of termination.  (Distinguish from fee simple determinable.)  See IRest. of Prop., sec. 45.  In other words, the vendor could cancel the sale, return the money paid on the purchase price, and

            "title to the property shall revert to the district."  RCW 53.28.060, supra.

             A taxable interest was transferred at the time of sale‑-upon the occurrence of certain conditions the vendor could exercise its power to revert (transfer back) to itself the same taxable interest it had sold.  Thus, another transfer has occurred which is taxed if consideration is present.

             (4) Consideration:  It would appear that valuable quid pro quo consideration determined by contract and enforced by statute exists, even though the contingency upon which the transfer of consideration will operate may, at first glance, appear unilateral in instigation and nature.  The return and the obligation to return (in effect a statutory promise) of the same value which was consideration for the first taxable transfer of the land is also consideration for the second as envisaged by this sales tax statute.

 Very truly yours,
Attorney General

Assistant Attorney General