Industry urges clarification that recording fees are not subject to sales and B&O tax; DOR flags administrative concerns

Jeff Mitchell, staff to the Senate Ways & Means Committee, presented Senate Bill 5111 on Jan. 28. The bill seeks to exempt document recording fees—when separately stated on a settlement statement, closing disclosure or similar form—from retail sales tax and business & occupation tax for escrow businesses and similar settlement agents.

Mitchell told the committee staff-level ambiguity contributed to widely divergent fiscal notes and uncertainty in audits. He said the fiscal note’s high estimate—$50 million to $55 million per year—stemmed from an interpretation that the bill’s language could exempt entire escrow agent service charges when recording fees are separately stated; a narrower reading that exempts only the recording‑fee portion would likely have a much smaller fiscal effect (previous related fiscal estimates were about $6 million per year).

Witnesses speaking in favor of the bill described industry practice and operational realities. Carrie Tellefson of the Washington Land Title Association said recording fees are pass‑through government charges and that recent audits have produced inconsistent results across DOR auditors. Maureen Pfaff, president of Olympic Peninsula Title, described a 2015 audit that initially assessed $75,834 in back taxes on recording fees before the amount was removed on appeal; she said other firms have faced assessments. JP Kissling of Fidelity Title said title companies are constrained by insurance‑regulator rules and cannot treat the recording excise tax as a cost of doing business.

Industry witnesses emphasized that the statutory recording fee is small—typically a $5 base recording fee—but the total recorded‑document charge often exceeds $300 because state surcharges and excise collections are added; several witnesses pointed to a Court of Appeals Division II decision holding that portions of the recording charge are excise taxes. Sean Holland, a longtime title industry professional, said: "Charging sales tax and B and O tax on the $283 in excise tax charged by the state with respect to nearly all recorded documents is simply a tax upon a tax that would ultimately be paid by every family that buys a home." (He was speaking about the common fee composition described during testimony.)

County auditors and the Washington State Association of County Auditors supported the bill, saying title and escrow providers act as agents that deliver documents and fees to county offices for recording. Pondera County Auditor Mary Anne Nichols told the committee that if title companies stopped recording documents on behalf of customers, counties would face increased walk‑in traffic, longer lines and administrative strain.

Department of Revenue staff (Kate Armstrong) testified neutral but cautioned that while sales tax exemptions for pass‑through recording fees can be administrable, exempting recording fees from the B&O tax undermines the tax’s broad base and makes administration harder. She cited RCW 82.04.050 and related WAC guidance as the statutory context containing current tax treatment.

No committee vote was recorded during the hearing. Witnesses and staff said they will continue working on bill language and an amendment intended to clarify intent and narrow fiscal ambiguity.