Washington Administrative Code › Title 458 - Revenue, Department of › Chapter 458-20 - Excise tax rules › Section 458-20-118 - Sale or rental of real estate, license to use real estate

Current through Register Vol. 24-14, July 15, 2024
(1) Amounts derived
			 from the sale and rental of real estate are exempt from taxation under the
			 business and occupation tax. However, there is no exemption of amounts derived
			 from engaging in any business wherein a mere license to use or enjoy real
			 property is granted. Amounts derived from the granting of a license to use real
			 property are taxable under the service B&O tax classification unless
			 otherwise taxed under another classification by specific statute, e.g., sale of
			 lodging taxed under retailing. (See
			 RCW
			 82.04.050 and
			 82.04.290.) Further, no exemption
			 is allowed for amounts received as commissions for the sale or rental of real
			 estate (RCW 82.04.390 ) nor for interest
			 received by persons engaged in the business of selling real estate on time or
			 installment contracts. For purposes of distinguishing the lease or rental of
			 real estate from the granting of a license to use real estate the department of
			 revenue will be guided by the following principles.
(2)
Lease or rental of real estate.
A lease or rental of real property conveys an estate or interest in a
			 certain designated area of real property with an exclusive right in the lessee
			 of continuous possession against the world, including the owner, and grants to
			 the lessee the absolute right of control and occupancy during the term of the
			 lease or rental agreement. An agreement will not be construed as a lease of
			 real estate unless a relationship of "landlord and tenant" is created thereby.
			 It is presumed that the sale of lodging by a hotel, motel, tourist court, etc.,
			 for a continuous period of thirty days or more is a rental of real estate. It
			 is further presumed that all rentals of mini-storage facilities, apartments and
			 leased departments constitute rentals of real estate. The rental of a boat
			 moorage slip or an airplane hangar/tie down site is presumed to be a rental of
			 real estate only if a specific space, slip, or site is assigned and the rental
			 is for a period of thirty days or longer.
(3)
License to use real estate.
A license grants merely a right to use the real property of another but
			 does not confer exclusive control or dominion over the same. Usually, where the
			 grant conveys only a license to use, the owner controls such things as
			 lighting, heating, cleaning, repairing, and opening and closing the premises.
(a) Persons who are involved in more than one
			 kind of business activity are required to segregate their income and report
			 under the appropriate tax classification based on the nature of the specific
			 activity (see
			 RCW
			 82.04.440 ).
(b) It will be presumed that a taxable
			 license to use or enjoy real property is granted in the rental of the
			 following:
(i) Hotel rooms (for periods of
			 less than 30 continuous days; see WAC
			 458-20-166 ).
(ii) Motels, tourist courts and trailer parks
			 (for periods of less than 30 continuous days; see WAC
			 458-20-166 ).
(iii) Cold storage lockers (see WAC
			 458-20-133 ).
(iv) Safety deposit boxes and private mail
			 boxes.
(v) Storage space (see WAC
			 458-20-182 ).
(vi) Space within park or fair grounds to a
			 concessionaire.
(vii) Hairdressers,
			 barbers, or manicurists who lease space within another business (see WAC
			 458-20-200 Leased
			 departments).
(viii) Use of boat
			 launch facilities for recreational purposes.
(ix) Space on a building for the attachment
			 of advertising signs, including for periods in excess of 30 continuous
			 days.
(c)RCW
			 82.04.050(2)(f) specifically
			 defines all services of a hotel, motel, or similar businesses as being retail
			 sales. Thus, the rentals of meeting rooms, display rooms, or ball rooms are
			 retail sales when rented out by such businesses. Persons who are not in the
			 business of selling lodging are taxable under the service B&O tax
			 classification on income from the rental of meeting rooms.