Real estate brokers (commonly referred to as agents), managing brokers, and designated brokers perform real estate brokerage services for real estate firms and are required to be licensed in this state. Real estate firms are required to pay business and occupation (B&O) tax on the gross commission earned by the firm, including the commission paid to brokers, managing brokers, and designated brokers. Generally, this means you do not have to report B&O tax unless the firm has not reported your commission income.

A real estate firm is a sole proprietorship, partnership, limited liability partnership, corporation, limited liability company, or other legally recognized business entity conducting real estate brokerage services in this state and licensed as a real estate firm. Real estate firms are required to pay business and occupation (B&O) tax on the gross commission earned by the firm, including the commission paid to brokers (commonly referred to as agents), managing brokers, and designated brokers.

Real estate firms may charge brokers for providing space (desk fees) and other resources (shared expenses) such as telephones, advertising, multiple listing services, and office supplies. These charges may be a fixed amount per month or may be computed as a percentage of commissions or percentage of sales.

The amounts charged for desk fees and shared expenses are subject to business and occupation (B&O) tax under the Service and Other Activities classification. These charges are part of a real estate firm’s gross income whether they are deducted from a broker’s commission or billed separately. Retail sales tax does not apply.

References

RCW 82.04.290 Tax on service and other activities.

WAC 458-20-224 Service and other business activities.

ETA 3145 Real Estate Brokers – Shared Commissions and Expenses

Mortgage brokers generally work with home buyers to determine the type of mortgage they need and find a lender that matches those needs.

See our Mortgage brokers guide for information on the taxability of these services.

Everyone who uses personal property in a business (in Washington) must complete a personal property tax listing form. This listing must be filed with your county assessor’s office by April 30^th of each year. Examples of personal property used in conducting business include, but are not limited to:

• Machinery and equipment.
• Computer hardware and software.
• Furniture and fixtures.
• Supplies.

For more information, please see ourPersonal Property Tax brochure and our How my business property is valued web page.

Real estate firms and other businesses may provide property management services to owners of residential or commercial properties. They are primarily responsible for renting or leasing properties, however they may also coordinate routine maintenance and minor repairs.

Gross income for property management services is subject to business and occupation (B&O) tax under the Service and Other Activities classification.

You are considered the consumer of any goods or retail services you buy in connection with providing property management services.

Deductions and exemptions

Management services for a housing authority

A deduction from B&O tax is available for gross wages, benefits, and payroll taxes paid to, or for, personnel performing on-site functions when received by:

• Nonprofit property management companies.
• For-profit property management companies working for a housing authority.
• For-profit property management companies working for a Limited Liability Company (LLC) or limited partnership (LP) if the sole managing member or sole general partner of the LLC or LP is a housing authority.

Examples of on-site functions include collecting rent, coordinating subcontractors, and property leasing. These services can be performed on site or from a central location.

You may take an “Other” deduction for qualifying amounts with a description such as “Property management under RCW 82.04.4274.”

Properties located outside of Washington

If you provide services associated with properties located outside of Washington, you may be able to use our apportionment formula to determine how much of your apportionable income is subject to B&O tax in Washington.

References

RCW 82.04.290 Tax on service and other activities.

RCW 82.04.4274 Deductions – Nonprofit management companies – Personnel performing on-site functions.

WAC 458-20-224 Service and other business activities.

WAC 458-20-19401 Minimum nexus thresholds for apportionable activities and selling activities.

WAC 458-20-19402 Single factor receipts apportionment – Generally.

Apportionment industry guide

Real estate businesses are subject to retail sales or use tax on the purchase of furniture, equipment, consumable goods, and retail services. Examples of purchases real estate businesses must pay sales or use tax on include, but are not limited to:

• Office equipment and furnishings.
• Mobile applications, such as apps used for managing lock boxes, lead generation, social media management, etc.
• Charges for the license to use a Multiple Listing Service (MLS) portal/application. This is considered a digital automated service (DAS)
• Construction, repair, and maintenance services.
• Marketing and promotional items, such as “for sale” signs, business cards, etc.
• Security systems.
• Landscaping services.

You owe Washington use tax when you acquire goods and certain retail services for use in Washington without paying sales tax. This includes items that are donated to your business or otherwise acquired without purchase.

Use tax rates are the same as sales tax rates. The location of first taxable use of the property as a consumer in Washington determines which rate applies to you.

Use our Tax Rate Lookup Tool to find tax rates and location codes for any location in Washington.

References

Chapter 82.08 RCW Retail sales tax

Chapter 82.12 RCW Use tax

WAC 458-20-145 Sourcing retail sales for business and occupation tax and state and local retail sale tax – Sourcing for use tax for purchasers.

WAC 458-20-178 Use tax and the use of tangible personal property.

Landscaping and horticultural services industry guide

Construction industry guide

Real estate appraisers assess the value of real property and provide a report of their findings. Real estate inspectors examine the condition of a home and/or building and provide a report of their findings.

Gross income for real estate appraisal services and real estate inspection services is subject to B&O tax under the Service and Other Activities classification. Retail sales tax does not apply.

However, if you provide repair, installation, or other constructions services as part of your inspection, you may be subject to retailing B&O tax and you may have to collect retail sales tax. Please see our Construction industry guide.

Properties located outside of Washington

If you provide services for real properties located outside of Washington, you may be able to use our apportionment formula to determine how much of your apportionable income is subject to B&O tax in Washington.

References

RCW 82.04.290 Tax on service and other activities.

WAC 458-20-224 Service and other business activities.

Apportionment industry guide

Real estate firms may hire photographers or videographers to help market their properties.

Generally, sales of digital photographs are subject to business and occupation (B&O) tax under the Retailing classification, and you must collect sales tax. However, you do not have to collect sales tax if the real estate firm provides a completed Digital Products and Remote Access Software Exemption Certificate.

If you merely sell the right to use your photographs while retaining ownership of those photographs, then you are licensing photographs. In this case, the charges are subject to B&O tax under the Royalties classification, and you do not have to collect sales tax.

The outright sale of all rights to a photograph (e.g., right to copy, publish, etc.) is not subject to B&O tax under the Royalties classification. Instead, this income is subject to B&O tax under Service and Other Activities B&O tax classification.

References

RCW 82.08.0208 Exemptions – Digital codes.

Photography industry guide

Many real estate brokers hire sign posting businesses to setup and take down the signs on properties offered for sale. The broker typically owns their “for sale” signs, while the sign posting business owns the post on which the broker’s sign will hang. The sign posting business will dig a hole in the ground, temporarily install a post, and hang the broker’s sign on the post. Once the property is sold or the listing contract expires, the sign posting business will remove the post and sign, then backfill the hole.

The income the sign posting business receives from this service is subject to business and occupation (B&O) tax under the Service and Other Activities classification. Retail sales tax does not apply.

The temporary installation of the post does not permanently improve real property. In addition, this is not a rental, as the broker does not have dominion or control over the post. Therefore, this service does not qualify as a retail activity.

WAC 458-20-204 Outdoor advertising and advertising display services.

You may refer a buyer or seller to another firm or broker. As a result, you may receive a fee when the real estate transaction closes. The referral fee you receive is subject to business and occupation (B&O) tax under the Service and Other Activities classification.

Property located outside of Washington

If you receive referral fees related to real properties located outside of Washington, you may be able to use our apportionment formula to determine how much of your apportionable income is subject to B&O tax in Washington.

References

RCW 82.04.255 Tax on real estate brokers.

WAC 458-20-19401 Minimum nexus thresholds for apportionable activities and selling activities.

WAC 458-20-19402 Single factor receipts apportionment – Generally.

Apportionment industry guide

Staging refers to making temporary changes to a home for purposes of showcasing the home or similar homes for sale. Staging generally includes arranging furniture and décor. Staging does not include making improvements to real property, such as painting walls, stenciling, wallpapering, etc.

See our Interior Decorators, Designers, & Consultants guide for more information on the taxability of these services.