Click here to skip to main content.
scenic picture from Washington state
RESEARCH TOOLS › MRSC Index › Finance - Real estate excise tax (Ch. 82.46 RCW), REET, real estate tax

MRSC Index A topical index to MRSC's information resources.

Finance: F 5.1230 - Real estate excise tax (Ch. 82.46 RCW), REET, real estate tax

Expand Section Electronic Documents (1 Results)

Expand Section Paper Documents (1 Results)

  1. Ordinance No. 2001-99s imposing an additional excise tax on each sale or real property in unincorporated Pierce County at the rate of one quarter of one percent of the selling price
    Request this document | Document Date: 11/01
    Jurisdiction: Pierce County

Expand Section MRSC Library Catalog Documents

Expand Section Featured Inquiries (14 Results)

  1. Is a capital facility plan required before expending Growth Management Act real estate excise tax (REET) funds?
    For the first quarter percent REET money, the initial language in the 1990 Growth Management Act was that these funds could be used primarily for capital projects in a capital facilities plan element for jurisdictions planning under the GMA. The 1992 revisions changed that language to solely for capital projects in a capital facilities plan element. RCW 82.46.010(2). More detailed information on the real estate excise tax is available on a separate Web page.

  2. May a city may use the first one-quarter percent real estate excise tax (REET) revenues to contribute to the improvement of a school district stadium/athletic field that the city would use for certain city recreational activities?
    Yes, under certain circumstances. The relevant statute, RCW 82.46.010(2) states as follows:

      The legislative authority of any county or any city may impose an excise tax on each sale of real property in the unincorporated areas of the county for the county tax and in the corporate limits of the city for the city tax at a rate not exceeding one-quarter of one percent of the selling price. The revenues from this tax shall be used by any city or county with a population of five thousand or less and any city or county that does not plan under RCW 36.70A.040 for any capital purpose identified in a capital improvements plan and local capital improvements, including those listed in RCW 35.43.040.


      After April 30, 1992, revenues generated from the tax imposed under this subsection in counties over five thousand population and cities over five thousand population that are required or choose to plan under RCW 36.70A.040 shall be used solely for financing capital projects specified in a capital facilities plan element of a comprehensive plan and housing relocation assistance under RCW 59.18.440 and 59.18.450.


    To comply with the expenditure restrictions in this statute, the stadium/athletic field would need to be in the capital facilities plan element of the city's comprehensive plan. Nothing appears to prohibit a city from including a school stadium/athletic field in their comprehensive plan, either as part of the school district's capital facilities plan element which could be adopted by reference into the city's comprehensive plan or as a specific capital project in the city's capital facilities plan element. In fact this would be necessary if a jurisdiction were to impose impact fees for schools. RCW 82.02.050(4) provides that

      Impact fees may be collected and spent only for public facilities defined in RCW 82.02.090 which are addressed by a capital facilities plan element of a comprehensive land use plan adopted pursuant to the provisions of RCW 36.70A.070 or the provisions for comprehensive plan adoption contained in chapter 36.70, 35.63, or 35A.63 RCW.


    "Public facilities" includes school facilities. RCW 82.02.090(7). Also, RCW 82.02.050 contemplates that a city or county could include facilities that may be the responsibility of a special district:

      If the capital facilities plan of the county, city, or town is complete other than for the inclusion of those elements which are the responsibility of a special district, the county, city, or town may impose impact fees to address those public facility needs for which the county, city, or town is responsible.


    If this requirement of inclusion of the facility in the city's capital facilities plan element or in the school district's plan element adopted by reference by the city is met, these REET revenues could be used for this facility if the expenditure has a city purpose. In AGO 1988 No. 19, the attorney general's office addressed whether REET revenues may be used by a county to fund capital improvements on property owned by a city. Although, this opinion addressed by pre-GMA version of RCW 82.46.010, the opinion still applies to the issue presented in this inquiry. That opinion states:



      We believe the critical question, under both the relevant statutes and the state constitution, is whether the capital improvement at issue is to be constructed or operated for a county purpose. The statutes do not establish a per se requirement that the improvement itself or the underlying real property be owned by the county. Where neither factor is present, however, it is highly problematical whether the improvement is truly intended to serve a county purpose. Absent any additional facts indicating that such a purpose would be served by the capital improvements referred to in your question, we conclude that the funding of such improvements would not be authorized.


    Since the stadium/athletic field would be used for city recreational programs, it would appear that there exists the requisite city purpose.


    We recommend that the city and the school district enter into an interlocal agreement that identifies the city's contribution to the improvement of the facility and what the city's use of the facility will be.



  3. May a city or county use real estate excise tax revenues to pay debt service on a councilmanic bond?
    Yes, as long as the project is one for which these revenues may be used. For example, revenues from the second quarter percent (REET 2) can only be spent on street, water, sewer, and parks projects. Therefore, these revenues could not be used to pay debt service on a new city hall or county courthouse. Note that if the real estate excise tax receipts fall short of the amount needed to pay debt service, the general fund must make up the difference.

  4. Can real estate excise tax funds be used for maintenance?
    Only if it's a major maintenance project in a capital facilities element or capital improvements plan. Sometimes it's hard to tell if a project qualifies. Painting is almost certainly not an accepted use. Putting a new roof on a building would probably be a permitted use. If the project is considered a "public work" for bidding purposes, then REET funds can be used. The second quarter percent (REET 2) can only be used for street, water, sewer, and parks major maintenance because its uses are limited to those kinds of projects.

  5. Can cities and counties use real estate excise tax funds for planning?
    Cities and counties cannot use these funds for planning in the sense of developing a capital facilities element or a capital improvements plan. However, MRSC has advised that cities and counties can use these funds for design costs, engineering costs, surveys, etc. for specific projects in their capital facilities element or capital improvements plan. Funds from the second quarter percent (REET 2) can only be used in conjunction with street, water, sewer, and parks projects. RCW 82.46.035(5).

  6. Can the real estate excise tax be levied even though the city or county is not yet allowed to spend it?
    Yes. The tax can be levied and placed in a municipal or county improvements fund until the city or coutny completes the capital facilities element of its comprehensive plan.

  7. When and how can a city or county (of any size) that is not planning under the Growth Management Act spend its real estate excise tax revenues?
    The receipts from the first quarter percent (REET 1) can be spent on "any capital purpose identified in a capital improvements plan and local capital improvements, including those listed in RCW 35.43.040." RCW 82.46.010(2). RCW 35.43.040 lists projects for which local improvement districts (LIDs) may be formed and includes everything from street projects to parks to sewers to swimming pools.

  8. When and how can a city or county that is planning under the Growth Management Act (GMA) and that has a population of over 5,000 spend its real estate excise tax revenues?
    Revenues from the first quarter percent (REET 1) may be spent only on capital projects in a capital facilities plan element of a comprehensive plan. RCW 82.46.010(2). RCW 82.46.010(6) lists these projects and the list seems to include everything a city or county might ever put in a capital facilities element, including the acquisition of land for parks. Since the projects must be in the capital facilities plan, obviously, the plan must be complete before any REET funds can be spent.

    Like REET 1 revenues, those from the second quarter percent of the real estate excise tax (REET 2) cannot be spent until the capital facilities element is finished. Allowable expenditures are street projects, water and sewer projects, and parks projects (excluding the acquisition of land). RCW 82.46.035(5).



  9. How and when can a city that is planning under the Growth Management Act (GMA) and that has a population of 5,000 or less spend its real estate excise tax revenues?
    The receipts from the first quarter percent (REET 1) can be spent on "any capital purpose identified in a capital improvements plan and local capital improvements, including those listed in RCW 35.43.040." RCW 82.46.010(2). RCW 35.43.040 lists projects for which local improvement districts (LIDs) may be formed and includes everything from street projects to parks to sewers to swimming pools. For a complete list, consult the statute.

    The second quarter percent (REET 2) cannot be spent until the city or county has completed the capital facilities element of its comprehensive plan. This part of the tax has more limited uses. It can only be spent on street projects, water and sewer projects, and parks projects (excluding the acquisition of land). RCW 82.46.035(5).



  10. Does a city or county need a vote of the people in order to levy the second quarter percent of the real estate excise tax (REET 2)?
    It depends. If the city or county is required to plan under the Growth Management Act, then only an affirmative vote of the legislative body is needed to levy this tax. However, if the city is located in a county that has chosen to plan under GMA, this tax may be levied only "if first authorized by a proposition approved by a majority of the voters." RCW 82.46.035(2). Only cities planning under GMA may levy this tax.

  11. What cities and counties can levy the second quarter percent of the real estate excise tax (REET2)?
    Counties that are required or have chosen to plan under the Growth Management Act (GMA) and the cities located in them. RCW 82.46.035(1).

  12. On what is the real estate excise tax based?
    The real estate excise tax is levied on all sales of real estate. The amount of the tax is based on the full selling price, including the amount of any liens, mortgages, and other debts given to secure the purchase.

  13. Is a city or county exempt from the real estate excise tax when purchasing real property?
    No. A sale of city or county real property is exempt from the real estate excise tax because such a sale is not included within the definition of "sale "for real estate excise tax purposes. However, in 1993, the legislature eliminated the same exemption for purchases of real property by a city, county, or other governmental entity. Purchases of real property (other than those by condemnation) by a city or county are thus subject to the tax.

  14. Is a purchase by a city or county of real property through the condemnation process subject to the real estate excise tax?
    No. RCW 82.45.010(3)(g) specifically exempts transfers of property through condemnation proceedings from the definition of "sale" for purposes of the real estate excise tax.

Expand Section Subject Pages (11 Results)

  1. Real Estate Excise Tax
    Provides information on the real estate excise tax
  2. AGO Opinion Letter Request
    Letter requesting opinion of use of capital improvements fund for purchase of sheriff's department vehicles.
  3. AGO Opinion Letter Response
    Response letter to request for opinion on use of Capital Improvements Fund for purchase of Sheriff's Department vehicles
  4. Sample Real Estate Excise Tax Ordinance
    MRSC sample ordinance to levy the first quarter percent of the real estate excise tax for cities that are not planning under the Growth Management Act (GMA) or for cities that are planning under GMA but which have a population of 5,000 or less.
  5. Sample Real Estate Excise Tax Ordinance
    MRSC sample ordinance to levy the first quarter percent of the real estate excise tax for all cities that are planning under GMA and have a population of more than 5,000.
  6. Sample Real Estate Excise Tax Ordinance
    MRSC sample ordinance to levy the second quarter percent of the real estate excise tax rates for cities planning under GMA.
  7. Sample Real Estate Excise Tax Ordinance
    MRSC sample ordinance to levy the first quarter percent of the real estate excise tax for counties that are not planning under the Growth Management Act (GMA) or for cities that are planning under GMA but which have a population of 5,000 or less.
  8. Sample Real Estate Tax Ordinance
    MRSC sample ordinance to levy the first quarter percent of the real estate excise tax for all counties that are planning under GMA and have a population of more than 5,000.
  9. Sample Real Estate Excise Tax Ordinance
    MRSC sample ordinance to levy the second quarter percent of the real estate excise tax rates for counties planning under GMA.
  10. Real Estate Excise Tax RCW Definitions
    Real estate excise tax definitions in the RCW.
  11. Statutes - Real Estate Excise Tax
    Real estate excise tax stautes in the RCW.