Court of Appeals panel weighs where title-insurance and escrow sales are 'sourced' under state law

A three-judge panel of Division 2 of the Washington Court of Appeals heard argument in Chicago Title Insurance v. State Department of Revenue (No. 598094), focusing on whether RCW 82.32.730’s sourcing hierarchy assigns sales of title insurance and escrow services to the location where the purchaser receives the service (the underlying property or purchaser address) or to the closing/agent office where the policy is issued.

Callie Barrett, counsel for the Washington Department of Revenue, told the panel that the statute’s definition of “receipt”—“making first use of the services”—points to sourcing based on where a purchaser makes first use, which the Department construes as linked to the real property that is the subject of the transaction. “Under these steps, the sales at issue here are properly sourced to Washington,” Barrett said, asking the court to reverse the superior court’s contrary ruling.

The argument turned on how to define “first use.” Barrett acknowledged that title abstracts and other materials are provided before closing, but argued the policy itself is issued and the funds dispersed at closing, and that destination-based sourcing was intended to focus on the purchaser’s receipt rather than the seller’s remote processing location. She added that if exact first-use timing cannot be determined from the audit, the sourcing hierarchy’s third step permits using purchaser address information available in seller business records.

Scott Edwards, counsel for Chicago Title, urged the opposite conclusion, saying the superior court correctly located first use at the closing site. “The superior court correctly concluded that the first use is at the closing location,” Edwards said, arguing the sale must be deemed to occur at one identifiable place and that whether the purchaser appears in person is legally irrelevant. He emphasized that the policy cannot be used before it exists and that escrow agents typically receive documents and money at a known office that records and tracks closing transactions.

Panel members pressed both sides on practical implications. Judge Linda Lee questioned whether tying first use strictly to the property ignores pre-closing uses—such as title abstracts and pre-closing review—by purchasers who may examine documents remotely. Judge Eric Price and Presiding Judge Bernard Viljasek explored hypotheticals about purchasers signing electronically while traveling, asking whether first use would then be wherever the buyer happens to be at that moment and how that would work administratively.

Barrett told the court that treating every e-signing location as first use would be impractical and that the statute’s third and fourth sourcing steps were designed to address uncertainty by allowing sourcing to purchaser address information in business records when exact timing or location is unavailable. Edwards responded that contemporaneous Department guidance and prior letter rulings historically identified the closing or agent office as the place of first use for title insurance and, for escrow services, the agent’s office where documents are first received.

The panel reserved further questions and took a short recess to reconstitute before the next case. No decision was issued from the bench at the hearing’s close.