HB 1115
In CommitteeHouse
Recording fees/escrow tax
Concerning the excise tax treatment of amounts received by title and escrow businesses from clients for remittance to a county filing office for the purpose of recording documents.
This status may be delayed. See Action History below for the latest updates.
How does a bill become law?
- Introduced: The bill is filed and assigned a number.
- Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
- Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
- Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
- Governor: The Governor reviews the bill and decides whether to sign or veto it.
- Signed: The bill has been signed into law.
AI Analysis
This bill clarifies that document recording surcharges—collected by title and escrow companies and remitted to counties for filing documents—are excise taxes, not fees, and therefore exempt from Washington’s sales and business and occupation (B&O) taxes. It prevents the state from taxing these amounts retroactively and ensures they are separately identified on closing documents to qualify for the exemption.
- Declares that document recording surcharges—previously assessed as taxable by the Department of Revenue—are excise taxes (not fees) and therefore exempt from sales and use tax and business and occupation (B&O) tax.
- Adds a new exemption in RCW 82.04 stating that amounts remitted to county filing offices for document recording are not subject to state sales or B&O taxes, provided they are separately identified on closing documents.
- Requires that only escrow agents primarily engaged in escrow services (as defined in RCW 18.44.011 and 18.44.021) qualify for the exemption.
- Mandates that recording surcharge amounts must be separately identified on settlement statements, HUD-1 forms, or closing disclosures to qualify for the tax exemption.
- Reenacts and amends RCW 82.04.050 to clarify the definition of 'retail sale' and reinforce that escrow services (excluding remitted recording amounts) remain taxable, while adding the new exemption for recording surcharges.
Who is affected
- Title and escrow companies — Title and escrow businesses—especially small, independent ones—may no longer be required to collect or remit sales and use tax or business and occupation (B&O) tax on recording surcharges they collect on behalf of counties, avoiding potential large back-tax assessments.
- County auditors and filing offices — Counties may continue to receive recording surcharges as before, but will no longer have to rely on title/escrow agents to collect taxes on those amounts—clarifying that the surcharge itself is an excise tax, not subject to sales/B&O tax.
- Real estate consumers (buyers and sellers) — Homebuyers and sellers may see more consistent and transparent settlement statements, as recording surcharges will be clearly separated and not bundled with taxable fees.
- Washington Department of Revenue — The Washington Department of Revenue will no longer pursue tax assessments against title/escrow companies for recording surcharges, reducing enforcement activity and potential litigation.
Pro/Con Analysis
Stronger case for benefits
Potential Benefits (3)
Small, independent title and escrow businesses avoid potentially large back-tax assessments (sales/B&O taxes on surcharges), which the legislature explicitly found would cause “severe hardship” — this protects cash flow and solvency for small businesses that collect surcharges on behalf of counties, not for their own revenue.
FinancialPeopleRef: Sec. 1(3); NEW Sec. 3(1)By clarifying that recording surcharges are excise taxes (not fees) and exempt from sales/B&O tax, the bill supports the intended policy purpose of the surcharge—funding housing-related programs—and prevents double taxation of funds meant to alleviate the housing crisis, ensuring more resources flow to housing initiatives rather than state tax collections.
HousingPeopleRef: Sec. 1(5); NEW Sec. 3(1)Homebuyers and sellers benefit from clearer, more transparent settlement statements where recording surcharges are itemized separately from taxable fees—this reduces confusion, prevents misallocation of costs, and helps consumers understand exactly what they’re paying for government services vs. private services.
FinancialPeopleRef: Sec. 1(4); NEW Sec. 3(3)
Potential Concerns (3)
The state loses tax revenue on amounts previously treated as taxable recording surcharges, reducing funds available for public services like education, transportation, and healthcare—though the bill asserts these taxes were never legally due, the Department of Revenue had begun collecting them post-BIAW ruling, and retroactive reassessment would have been legally questionable; the fiscal impact is likely minimal but still represents a net reduction in public revenue.
FinancialRef: Sec. 2(3)(h); NEW Sec. 3(1)The bill creates a narrow exemption limited to entities “primarily engaged in escrow agent services” as defined in RCW 18.44.011(7) and (8) and 18.44.021(1), potentially excluding hybrid title companies that offer escrow as a secondary service or those using third-party subcontractors—this creates compliance complexity and may unintentionally disadvantage smaller or diversified title/escrow providers.
Business & EmploymentRef: Sec. 2(3)(h); NEW Sec. 3(2)The requirement that recording surcharges be “separately identified” on closing documents adds administrative burden—title and escrow agents must revise settlement workflows, update software systems, and train staff to avoid noncompliance penalties, which disproportionately impacts small independent title agencies with limited resources.
Business & EmploymentRef: NEW Sec. 3(3)
Who Is Most Affected
Small independent title and escrow agencies benefit significantly: they avoid large back-tax liabilities and compliance risks, preserving cash flow and enabling continued operation. The bill’s findings explicitly cite their vulnerability to assessments, and the narrow exemption still covers most core escrow agents.
Homebuyers and sellers benefit from transparency and reduced confusion in closing costs; since recording surcharges are now clearly separated and exempt, they are less likely to be overcharged or misled about what portion is tax vs. government fee.
Counties continue to receive recording surcharges as intended, but no longer rely on title agents to collect additional taxes on those amounts—this simplifies accounting and reduces audit risk for counties, though it does not change the net revenue they receive.
The Department of Revenue avoids costly litigation and enforcement efforts on a legally dubious position (the BIAW ruling already clarified the surcharge is an excise tax); this reduces administrative burden and aligns DOR with binding judicial interpretation.
Larger title insurance corporations with diversified service lines may benefit less than small escrow-focused firms, as the exemption is narrowly tied to “primarily engaged in escrow agent services”—if their escrow operations are not the dominant line of business, they may not qualify, creating uneven relief across firm types.