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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.
When a real estate commission on a particular transaction is divided among real estate firms at the closing of the transaction, each firm pays B&O tax on its respective shares of the commission.
Brokers, designated brokers, and managing brokers within the same real estate firm are not required to pay B&O tax when the firm has paid the B&O tax on gross commissions.
For reporting periods starting on or after January 1, 2025, commission earned from the sale of real estate are subject to B&O tax under the Real Estate Commissions classification at a 1.5% rate. There is no change to the tax rate. Retail sales tax does not apply.
Prior to 2025, real estate commissions were reported under the Service and Other Activities classification at a1.5% rate.
Note: If you collect or withhold B&O tax from the amount of commission paid to your brokers, such charges are considered part of your gross income and are subject to B&O tax under the Service and Other Activities classification.
Property located outside of Washington
If you earn commission on sales of real property 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.
Out of state businesses
You must register to report B&O tax if you meet reporting thresholds and have nexus, including more than $100,000 in gross receipts attributed to Washington. See our Out of state businesses reporting thresholds and nexus guide.
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.
