Bill would exclude escrow remittances for recording from retail sales tax and B&O tax

House Bill 1115 would exclude amounts that escrow agents remit to county filing offices for statutorily set document recording fees from the definition of retail sale and from the business-and-occupation tax when those charges are separately identified on settlement statements.

The bill’s sponsor, Rep. Mike Tharinger, told the committee the measure is intended to clarify that fees counties set by statute and that escrow agents collect and remit on behalf of buyers or sellers are pass-through items, not taxable retail services. Christina King, staff to the committee, told members that under current law the definition of retail sale includes escrow services and that a fiscal note projects a substantial general-fund revenue decrease if the exemption is enacted.

Title and escrow industry witnesses said the practice across Washington has long been for escrow agents to advance mandatory recording fees to county auditors and then obtain reimbursement on settlement statements. Several speakers said Department of Revenue auditors have taken inconsistent positions in recent audits and appeals. Maureen Pfaff of Olympic Peninsula Title described a prior audit that the company successfully appealed, and JP Kissling of Fidelity Title said his company has never collected sales tax on recording fees and faces uncertainty. Luke Courier, Paul Hoffman and others said charging sales tax on the reimbursed recording fees would create additional costs for buyers and disrupt longstanding settlement practices.

County auditors and other local officials told the committee they favor the exemption because private companies delivering documents on behalf of customers provide an efficient public service and removing that practice could increase foot traffic and administrative burden at county offices. Mary Ann Nichols of the Washington Association of County Auditors said individuals can record documents directly but that relying on title companies reduces errors and delays.

The Department of Revenue signed in neutral but cautioned that while exempting the fees from retail sales tax would be administrable, excluding them from B&O tax raises policy and administrative concerns. DOR staff noted that B&O is a broad gross-receipts tax with no deduction for cost of doing business and that exempting common pass-through items risks complicating administration.

Supporters including the Building Industry Association argued the change would lower closing costs for homebuyers and improve predictability for the housing market. Opponents did not speak in the hearing; DOR flagged potential multi-million-dollar revenue impacts in the fiscal note and noted a Washington Court of Appeals decision (cited in testimony) that characterized some recording surcharges as excise taxes rather than fees.

The committee did not take a final vote during the hearing. Staff and industry witnesses signaled willingness to work on statutory language to narrow scope and address DOR implementation concerns; sponsors said they expect follow-up negotiations in committee.

Ending: If advanced, the bill would require technical drafting to limit tax exposure and clarify which recorded charges are excluded and under what documentation standard on settlement statements. The committee hearing record includes multiple audits and appeals that lawmakers said they intend to consider while drafting final language.