Skip to main content
Real estate excise tax applies to water rights when the rights are transferred separate from the land. The tax applies when an existing water right is transferred for valuable consideration.
What is a water right?
A “water right” is a legal authorization to use a certain amount of public water for a designated purpose.
Water rights can be changed or transferred. The change or transfer must be authorized by the Department of Ecology pr county Water Conservancy Boards.
Are water rights taxable?
Yes. Water rights fall within the definition of real property and are subject to real estate excise tax (REET) when transferred for valuable consideration. Valuable consideration means money or anything of value given in return for the transfer.
Examples of taxable transactions include:
- Water rights used on one person’s land that are transferred for use on another person’s land for valuable consideration.
- Consolidation of water rights when ownership of the rights transfers for valuable consideration.
- Development or changes to a privately-owned water supply system when ownership of the rights transfer for valuable consideration.
Tax liability
The tax is subject to a graduated REET rate. The seller must complete a real estate excise tax affidavit and pay the tax to the county treasurer's office in the county where the water right exists. Tax is due at the time of sale.
The seller is liable for the tax, by law. However, a buyer may become co-liable if the tax remains unpaid, and the buyer or seller did not report the sale to the local county within 30 days of the sale or transfer.
Additional questions
Contact the Audit Division through email at DORRealEstateExciseTax@dor.wa.gov or by calling 360-704-5905.
References
Chapter 82.45 RCW – Excise tax on real estate sales
Department of Ecology – Water rights
WAC 458-61A-111 - Easements, development rights, water rights, and air rights.
