Property Management in Washington
Washington has no income tax, and it still taxes the sale of a management book.
Chapter 82.87 RCW reaches the sale of a management company through an excise tax that exempts real estate and does not exempt goodwill. That is the first of three things a Washington seller has to price. The second is a statute that voids employee and contractor non-competes across the state on June 30, 2027 and leaves the seller's own covenant standing. The third is what the buyer inherits on terms the purchase price does not set: the trust accounts, and a business and occupation tax measure that a for-profit manager cannot net on-site payroll out of.
Seattle-Tacoma-Bellevue / Spokane-Spokane Valley / Vancouver and Clark County (Portland-Vancouver metro) / Olympia-Lacey-Tumwater
What Washington's non-compete ban leaves standing after June 30, 2027
The Department of Labor and Industries publishes the earnings thresholds required by RCW 49.62.040, and for 2026 they are $126,858.83 for employees and $317,147.09 for independent contractors. L&I states that only employees or independent contractors who earn more than the thresholds established by law can be held to non-competition agreements, and that below the threshold the agreement is void and unenforceable under chapter 49.62 RCW. In a property management company the people who hold the owner and association relationships are portfolio managers and business development staff, and whether their covenants bind at all turns on which side of $126,858.83 their earnings fall. Run each of them against the current figure before a buyer prices the business on them, because the threshold is tested on annualized earnings from the party seeking enforcement rather than on the salary recited in the agreement.
A version of RCW 49.62.020 enacted by 2026 c 149 and effective June 30, 2027 makes all noncompetition covenants void and unenforceable regardless of when the parties entered into them. After that date it is a violation to enforce one, to attempt to enforce it, to threaten to enforce it, or to represent that a worker is subject to one. By October 1, 2027 the employer must make reasonable efforts to give written notice to current and former employees and independent contractors whose noncompetition covenant is still within its effective time period that the covenant is void. A buyer signing employee non-competes at a closing before June 30, 2027 is buying restraints that end on that date and a duty to write to those people by October 1, 2027 saying so.
One exclusion is why the seller's own covenant behaves differently. In the June 30, 2027 version of RCW 49.62.010, subsection (3)(e) takes six things outside the definition of a noncompetition covenant: a nonsolicitation agreement, a confidentiality agreement, a covenant prohibiting use or disclosure of trade secrets or inventions, at (iv) "a covenant entered into by a person purchasing or selling the goodwill of a business or otherwise acquiring or disposing of an ownership interest, but only if the person signing the covenant purchases, sells, acquires, or disposes of an ownership interest representing one percent or more of the business," at (v) a covenant entered into by a franchisee where the franchise sale complies with RCW 19.100.020(1), and at (vi) a qualifying written agreement to repay out-of-pocket educational expenses. The same carve-out is in force today at RCW 49.62.010(4)(d), which reads "an interest" where the later version reads "an ownership interest."
One percent is the planning number. A founder selling the whole company sits comfortably inside the carve-out. A minority holder, an option holder, or a portfolio lead rolling less than one percent sits outside it and can be bound only as an employee, which stops working on June 30, 2027. Where a Washington management company's owner and association relationships sit with two or three people who are not the founder, the restraint has to be delivered through equity, by giving each of them a real one percent or more to sell into the transaction.
Until June 30, 2027 there is also a price on asking a court to narrow a covenant. RCW 49.62.080(3) requires the party seeking enforcement to pay the aggrieved person the greater of actual damages or a $5,000 statutory penalty, plus attorneys' fees, expenses and costs, where a court or arbitrator reforms, rewrites, modifies or only partially enforces the covenant. Washington permits reformation and charges the enforcing party for it. The version of RCW 49.62.080 enacted by 2026 c 149 s 5 drops that subsection, because by then enforcing the covenant at all is the violation. The covenant the buyer asks the seller to sign sits outside chapter 49.62 RCW, so the eighteen-month presumption in the current RCW 49.62.020(2) does not cap it and June 30, 2027 does not end it.
Chapter 82.87 RCW exempts the buildings and not the contracts
RCW 82.87.040(1)(a) has imposed, since January 1, 2022, an excise tax of 7 percent on an individual's Washington capital gains from the sale or exchange of long-term capital assets. Subsection (1)(b), added by 2025 c 421 s 101, adds 2.90 percent on the portion of those gains exceeding $1,000,000 beginning January 1, 2025, which is a 9.9 percent combined marginal rate at the top rather than a second tax stacked on the first. The tax is payable only by individuals, and subsection (4)(b)(i) treats an individual as the beneficial owner of long-term capital assets held by a partnership, limited liability company, S corporation, grantor trust or other pass-through, to the extent of the ownership interest reported federally. An LLC, S corporation or partnership does not stand between the owner and this tax.
The Department of Revenue exempts real estate, and exempts an interest in a privately held entity only to the extent the gain is directly attributable to real estate the entity owns directly. Goodwill is exempt in exactly one line of business, the sale of a franchised auto dealership. A property management company owns management agreements, the owner and association relationships behind them, and goodwill, so neither carve-out reaches the thing being sold.
The landlord on the other side of those agreements pays on price rather than on gain. Washington collects real estate excise tax under chapter 82.45 RCW on the selling price, usually from the seller, at graduated state rates running to 3.0 percent on the top tier before local REET. That bears on the fact pattern where an owner holds the office building in the same entity as the management business. DOR treats a transfer of 50 percent or more of an entity's ownership interest as a controlling interest transfer, aggregating transactions across a 36-month lookback, and REET reaches the real property that entity holds. A straight sale of the whole company can carry REET on the building and the capital gains excise tax on the contracts.
Below a threshold none of the capital gains tax applies. DOR puts the standard deduction at $278,000 for 2025 and $270,000 for 2024, and adjusts it for inflation annually. The 2026 amount was not published on DOR's capital gains page as of September 7, 2026, so the figure to run is the one for the year the gain is recognized. Both tiers are computed on Washington capital gains as defined in RCW 82.87.020(16), which is the adjusted capital gain as modified by the standard deduction in RCW 82.87.060, so the deduction reduces the base for the 2.90 percent tier as well as the 7 percent one. Beginning with tax year 2025 a credit is available for B&O tax paid on a sale that is also subject to the capital gains tax, so a seller that owes both on the same sale does not pay both in full.
RCW 82.87.070 can take the whole gain to zero, and a seller can fail it on ownership alone. The deduction covers the sale of substantially all, meaning at least 90 percent, of the fair market value of a qualified family-owned small business's assets, or the transfer of substantially all of the taxpayer's interest in one. The ownership gate comes first: a sole proprietorship interest, or at least 50 percent held by the taxpayer and family, or 30 percent where two families hold 70 percent or three families hold 90 percent. A firm owned by unrelated partners fails there regardless of size or tenure. The qualifying interest must then have been held for the five years immediately preceding the sale, a continuous clock that a mere change of entity type or other nonmaterial change does not reset. Material participation is the looser test at five of the ten years immediately preceding, so an owner who stepped back two years ago is usually still inside it.
The statute sets worldwide gross revenue in the twelve months immediately preceding the sale at $10,000,000 or less, and RCW 82.87.150 requires DOR to adjust that amount each October by the Seattle consumer price index for all urban consumers, rounded to the nearest $1,000, effective the following calendar year. A seller who reads the statutory figure and concludes they are over it may be under the indexed ceiling for the year they actually close. Because the window is the trailing twelve months, a strong year can put a seller over a ceiling they were under the year before. The 90 percent floor is a separate test: retaining a slice of the book, or closing in two tranches, can leave the first closing short of substantially all.
What the B&O measure counts that your P&L nets out
RCW 82.04.4274 allows a deduction from the B&O measure for amounts received for gross wages, benefits and payroll taxes paid to or for personnel performing on-site functions, and it names three recipients: a nonprofit property management company receiving them from the owner of the property, a property management company receiving them from a housing authority, and a property management company receiving them from a limited liability company or limited partnership whose sole managing member or sole general partner is a housing authority. A conventional for-profit third-party manager is not on that list. DOR taxes gross income from property management services under the Service and Other Activities classification, so on-site payroll that a for-profit manager collects and passes through sits inside its taxable gross income, and a company that has been netting it out has been underreporting a gross receipts tax.
RCW 82.32.140(1) picks that up at closing. When a taxpayer quits business, or sells out, exchanges or otherwise disposes of more than fifty percent of the fair market value of either its tangible or its intangible assets, any tax payable becomes immediately due and a return and payment are owed within ten days. A management company sale clears the intangible half by definition, because the assets are contracts and goodwill. Where the seller does not pay inside those ten days, subsection (2) makes the successor liable for the full amount of the tax, and the only limitation runs the other way: where the fair market value of the assets acquired is less than fifty thousand dollars, the successor's liability is limited to that value, with the burden of establishing it on the successor. Above that line the exposure is the tax on whatever the seller failed to report, which for a for-profit manager includes the on-site payroll it collects and passes through.
The release runs on a clock the buyer starts after closing rather than on a clearance it collects before. Under RCW 82.32.140(4) no successor is liable if it gives the Department written notice of the acquisition and no assessment is issued against the former operator within six months of receipt, with a copy mailed or provided to the successor. DOR's guidance on buying the assets of a business describes the Successorship Notice as the way to do that, and a tax status letter as the way to see what is outstanding beforehand. The industrial insurance rule at RCW 51.16.200 runs the same structure on 180 days and carries no dollar cap at all.
Performing property management services for others is a real estate brokerage service under RCW 18.85.011(17)(h), so the company has to be a licensed Washington real estate firm and its client money is trust money. RCW 18.85.285 puts the duties on the designated broker: adequate records of all real estate transactions handled by or through the firm, client funds kept separate and physically segregated from the licensee's own, and pooled interest-bearing trust accounts, with the procedures in chapter 308-124E WAC and a section devoted to property management at WAC 308-124E-115. RCW 59.18.270 puts a second requirement on the landlord whose deposits the company holds, that they go promptly into a trust account at a Washington financial institution or licensed escrow agent, so the manager's account has to satisfy a rule written for the other side of the management agreement.
Questions Washington sellers ask
- Does Washington tax the gain when I sell my property management company?
- Yes, even though the state has no income tax. Chapter 82.87 RCW imposes an excise tax of 7 percent on an individual's Washington capital gains, plus an additional 2.90 percent on the portion above $1,000,000, a 9.9 percent combined marginal rate at the top. Real estate is exempt, and so is the part of an entity interest directly attributable to real estate the entity owns directly, but management contracts and goodwill are neither. The standard deduction was $278,000 for 2025 and is indexed annually, so a genuinely small book can fall out of the tax entirely. The qualified family-owned small business deduction at RCW 82.87.070 has an ownership gate that a firm held by unrelated partners fails regardless of size or tenure, so establish which side of it you are on before a structure is agreed. This firm does not give tax advice.
- Can a financial buyer own my Washington real estate firm outright?
- Yes. RCW 18.85.011(10)(b) requires the firm's designated broker to be a natural person who has a controlling interest in the firm, is designated by the entity, and holds a managing broker license with a designated broker endorsement. RCW 18.85.011(8) defines controlling interest as "the ability to control either the operational or financial, or both, decisions of a firm." That is a control test rather than an equity test, so a sponsor can own the company and still satisfy it, provided a licensed designated broker actually holds operational or financial decision authority and the operating agreement and delegations say so. A designated broker with a title and no authority does not meet it.
- Are the non-competes my portfolio managers signed still enforceable in Washington?
- Many of them are already void. Only a worker earning more than the threshold published by the Department of Labor and Industries can be held to one, and for 2026 that is $126,858.83 for employees and $317,147.09 for independent contractors. Separately, a version of RCW 49.62.020 enacted by 2026 c 149 makes all noncompetition covenants void and unenforceable on June 30, 2027 regardless of when they were entered into, and requires the employer to make reasonable efforts by October 1, 2027 to notify current and former employees and independent contractors whose covenant is still within its effective time period.
- Do my on-site leasing and maintenance staff need Washington real estate licenses?
- Generally no. RCW 18.85.151(13) exempts a person employed or retained by or for the owner or a designated or managing broker whose property management work is limited to delivering or receiving lease applications, leases and amendments, receiving security deposits and rent payable to the firm or owner, showing rental units or executing leases under the direct instruction of the owner or designated or managing broker, providing information about a unit or lease to a prospective tenant, or assisting in the performance of property management functions by carrying out administrative, clerical, financial or maintenance tasks. The people who sign management agreements, set rents, negotiate on the owner's behalf and control trust funds are not covered by it.
- Is my community association book outside Washington's licensing requirement?
- It depends on what the company actually does for the association. RCW 18.85.151(12) exempts common interest community managers who, "in an advisory capacity and for compensation or in expectation of compensation," provide management or financial services, negotiate agreements to provide them, or represent themselves as providing them to an association, if they do not promote the purchase, listing, sale, exchange, optioning, leasing, or renting of a specific real property interest. A full-service company that collects assessments, controls association funds, contracts vendors, or leases association-owned units is not plainly advising, and a buyer should not assume an association book can be acquired without a firm license until Washington counsel has confirmed the exemption reaches it.
Where these facts come from
Everything above that is a rule rather than a judgment is listed here with its publisher and the date it was checked. Licensing, tax and non-compete rules change, sometimes without much notice. None of this is legal or tax advice, and it is not a substitute for your own counsel and CPA.
RCW 18.85.011(17) defines "real estate brokerage services," and subsection (17)(h) expressly includes "Performing property management services, which includes with no limitation: Marketing; leasing; renting; the physical, administrative, or financial maintenance of real property; or the supervision of such actions." Subsection (10)(b) defines a "designated broker" for an entity as a natural person who has a controlling interest in the firm, is designated by the entity, and whose managing broker license carries a "designated broker" endorsement. Subsection (8) defines "controlling interest" as "the ability to control either the operational or financial, or both, decisions of a firm." Subsection (3) defines "business opportunity" as "business, business entity, and good will of an existing business or any one or combination thereof when the transaction or business includes an interest in real property." Last amended 2017 c 59 s 1.
Washington State Legislature, RCW 18.85.011. Checked 2026-09-07.
Subsection (17) also reaches advertising or holding oneself out as engaged in real estate brokerage services at (d), advising, counseling or consulting parties in connection with real estate transactions at (e), and collecting, holding or disbursing funds in connection with real estate transactions at (g). Whether chapter 18.85 RCW reaches an intermediary on a transaction that includes real property turns on those activity definitions and is a question for Washington counsel; this page states no conclusion about it, and none about the separate Washington Securities Act broker-dealer question that an equity sale raises under RCW 21.20.040.
RCW 18.85.151 exempts from chapter 18.85 RCW, at subsection (1), any person who purchases or disposes of property or a business opportunity for that individual's own account, or that of a group of which the person is a member, and their employees. Subsection (12) exempts "Common interest community managers who, in an advisory capacity and for compensation or in expectation of compensation, provide management or financial services, negotiate agreements to provide management or financial services, or represent themselves as providing management or financial services to an association governed by chapter 64.32, 64.34, or 64.38 RCW, if they do not promote the purchase, listing, sale, exchange, optioning, leasing, or renting of a specific real property interest." Subsection (13) exempts a person employed or retained by or for the owner or a designated or managing broker whose property management work is limited to delivering or receiving lease applications, leases and amendments, receiving security deposits and rent payable to the firm or owner, showing rental units or executing leases under the direct instruction of the owner or designated or managing broker, providing information about a unit or lease to a prospective tenant, or "[a]ssisting in the performance of property management functions by carrying out administrative, clerical, financial, or maintenance tasks."
Washington State Legislature, RCW 18.85.151. Checked 2026-09-07.
A second version, enacted by 2024 c 321 s 403 and effective January 1, 2028, repoints subsection (12) from chapters 64.32, 64.34 and 64.38 RCW to chapter 64.90 RCW. That is a cross-reference update reflecting the common interest ownership consolidation; it does not change who must be licensed. The "in an advisory capacity" limiter appears in both versions, and whether a particular association management book stays inside it is a question of fact about how the seller operates.
RCW 18.85.285, "Transactions and recordkeeping—Trust accounts—Requirements," requires the designated broker to keep adequate records of all real estate transactions handled by or through the firm, requires licensees to keep separate and apart and physically segregated from the licensees' own funds all funds or moneys of clients including advance fees, and requires real estate firms to maintain pooled interest-bearing trust accounts for client funds, with the designated broker or the designated broker's delegate responsible for directing the depository and for notifying parties where trust funds are subject to competing claims.
Washington State Legislature, RCW 18.85.285. Checked 2026-09-07.
This section was recodified from RCW 18.85.310 pursuant to 2008 c 23 s 49, effective July 1, 2010. Secondary material and older checklists still cite 18.85.310, which now resolves only to a disposition note. Cite 18.85.285.
Chapter 308-124E WAC is titled "Real estate—Trust account procedures" and sets the client funds rules: WAC 308-124E-100, delivery of client funds and negotiable instruments; 308-124E-105, administration of funds held in trust, general procedures; 308-124E-110, administration of funds held in trust, real estate and business opportunity transactions; and 308-124E-115, administration of funds held in trust, property management.
Washington State Legislature, chapter 308-124E WAC. Checked 2026-09-07.
Cited for the existence and scope of the trust account procedures, including the property management section. The specific record and reconciliation mechanics sit in the individual sections and should be read with Washington counsel or the Department of Licensing before a trust account true-up is drafted.
RCW 59.18.270 provides that "All moneys paid to the landlord by the tenant as a deposit as security for performance of the tenant's obligations in a lease or rental agreement shall promptly be deposited by the landlord in a trust account, maintained by the landlord for the purpose of holding such security deposits for tenants of the landlord, in a financial institution as defined by RCW 30A.22.041 or licensed escrow agent located in Washington," with written notice to the tenant of the name, address and location of the depository.
Washington State Legislature, RCW 59.18.270. Checked 2026-09-07.
The statute speaks to the landlord. A management company holding deposits does so as the landlord's agent and under the brokerage trust account rules as well; the interaction of the two regimes on a specific book is a question for counsel.
The Department of Labor and Industries publishes the inflation-adjusted thresholds required by RCW 49.62.040. For employees: $116,593.18 (2023), $120,559.99 (2024), $123,394.17 (2025) and $126,858.83 (2026). For independent contractors: $291,482.95 (2023), $301,399.98 (2024), $308,485.43 (2025) and $317,147.09 (2026). L&I states that "[o]nly employees or independent contractors who earn more than the thresholds established by law can be held to non-competition agreements," and that below the threshold the agreement "is considered void and unenforceable under RCW 49.62."
Washington State Department of Labor & Industries. Checked 2026-09-07.
RCW 49.62.020 carries two versions. The version effective until June 30, 2027 makes a noncompetition covenant void and unenforceable unless the employer disclosed the terms in writing no later than initial acceptance of the offer, or provided independent consideration where the covenant was entered into after employment began; unless the employee's annualized earnings from the party seeking enforcement exceed the indexed threshold; and, where the employee was laid off, unless enforcement includes compensation equal to base salary for the enforcement period less subsequent earnings. Subsection (2) requires a court or arbitrator to presume any covenant exceeding eighteen months after termination unreasonable and unenforceable, rebuttable only by clear and convincing evidence. The version effective June 30, 2027, enacted as 2026 c 149 s 4, provides that "[b]eginning on June 30, 2027, all noncompetition covenants are void and unenforceable regardless of when the parties entered into the noncompetition covenant," makes it a violation to enforce, attempt to enforce, threaten to enforce, or represent that a worker is subject to one, and requires employers by October 1, 2027 to make reasonable efforts to give written notice to current and former employees and independent contractors whose noncompetition covenant is still within its effective time period that the covenant is void.
Washington State Legislature, RCW 49.62.020. Checked 2026-09-07.
The October 1, 2027 notice duty is owed to current and former employees and independent contractors whose covenant is still within its effective time period, not to everyone who ever signed one.
In the version of RCW 49.62.010 enacted by 2026 c 149 s 3 and effective June 30, 2027, subsection (3)(e) excludes six categories from the definition of "noncompetition covenant": (i) a nonsolicitation agreement; (ii) a confidentiality agreement; (iii) a covenant prohibiting use or disclosure of trade secrets or inventions; (iv) "a covenant entered into by a person purchasing or selling the goodwill of a business or otherwise acquiring or disposing of an ownership interest, but only if the person signing the covenant purchases, sells, acquires, or disposes of an ownership interest representing one percent or more of the business"; (v) a covenant entered into by a franchisee where the franchise sale complies with RCW 19.100.020(1); and (vi) a qualifying written agreement to repay out-of-pocket educational expenses. The version effective until June 30, 2027 carries the same sale-of-business carve-out at subsection (4)(d), worded "an interest representing one percent or more of the business." The one percent floor was added by 2024 c 36 s 2.
Washington State Legislature, RCW 49.62.010. Checked 2026-09-07.
The carve-out is carried forward with a one-word change: the current version says "an interest," the 2027 version says "an ownership interest." It is not preserved verbatim. Because the sale-of-business covenant sits outside chapter 49.62 RCW entirely, the chapter's earnings thresholds, its eighteen-month presumption and its reformation penalty do not reach it.
RCW 49.62.080(3), in the version effective until June 30, 2027, provides that if a court or arbitrator "reforms, rewrites, modifies, or only partially enforces" a noncompetition covenant, the party seeking enforcement must pay the aggrieved person the greater of actual damages or a $5,000 statutory penalty, plus reasonable attorneys' fees, expenses and costs. The version enacted by 2026 c 149 s 5 and effective June 30, 2027 does not carry that subsection forward and provides a single violation remedy at the greater of actual damages or $5,000 plus fees.
Washington State Legislature, RCW 49.62.080. Checked 2026-09-07.
Washington permits reformation and prices it; it does not prohibit it. RCW 49.62.020(1) in its current version expressly contemplates partial enforcement. Any statement that Washington courts will not narrow a covenant is wrong.
RCW 82.87.040(1)(a) imposes, beginning January 1, 2022, an excise tax on the sale or exchange of long-term capital assets equal to 7 percent of an individual's Washington capital gains, payable only by individuals. Subsection (1)(b), added by 2025 c 421 s 101, imposes an additional excise tax beginning January 1, 2025 equal to 2.90 percent of the portion of an individual's Washington capital gains exceeding $1,000,000, for a 9.9 percent combined top marginal rate. Subsection (4)(b)(i) treats an individual as the beneficial owner of long-term capital assets held by a pass-through or disregarded entity such as a partnership, limited liability company, S corporation or grantor trust, to the extent of the individual's ownership interest as reported federally. "Washington capital gains" is defined at RCW 82.87.020(16) as adjusted capital gain as modified in RCW 82.87.060, which is the standard deduction, so both tiers are computed after the deduction. The 2025 act's application note states that section 101 applies to taxes imposed in calendar year 2025 for collection in calendar year 2026, and the act took effect May 20, 2025.
Washington State Legislature, RCW 82.87.040. Checked 2026-09-07.
The 2.90 percent is an additional rate on the excess, not a separate 9.9 percent stacked on the 7 percent. Any illustration that applies both tiers to a gross gain before the standard deduction overstates the tax.
The Department of Revenue's capital gains tax page states the tax applies to the sale or exchange of long-term capital assets such as stocks, bonds, business interests, or other investments and tangible assets, and lists the exempt assets: real estate; interests in a privately-held entity to the extent that the capital gain or loss from the sale or exchange is directly attributable to the real estate owned directly by such entity; assets in certain retirement accounts; condemned property; certain livestock; assets depreciable under IRC section 167(a)(1) or expensable under section 179; timber and timberlands; commercial fishing privileges; and goodwill received from the sale of a franchised auto dealership. DOR states the standard deduction is $278,000 for 2025 and was $270,000 per year per individual, married couple, or domestic partnership in 2024, and that the amount is adjusted for inflation annually. A deduction is available for the long-term capital gain from an individual's sale of all or substantially all of a qualified family-owned small business. Starting with tax year 2025 a credit is available equal to B&O tax paid on a sale or exchange also subject to the capital gains tax.
Washington State Department of Revenue. Checked 2026-09-07.
No 2026 standard deduction amount was published on this page as of September 7, 2026, and the page publishes no indexed worldwide gross revenue ceiling for the family-owned small business deduction. Run both figures for the tax year in which the gain is recognized rather than relying on the 2025 amounts.
RCW 82.87.070 allows a taxpayer to deduct from Washington capital gains the adjusted capital gain from the sale of substantially all of the fair market value of the assets of, or the transfer of substantially all of the taxpayer's interest in, a qualified family-owned small business. "Substantially all" means at least 90 percent. A qualified family-owned small business is one in which the taxpayer held a qualifying interest for at least five years immediately preceding the sale, with the holding period not reset by a mere change of entity type or a nonmaterial change; in which the taxpayer or family members materially participated in operating the business for at least five of the ten years immediately preceding the sale, unless the sale was to a qualified heir; and "[t]hat had worldwide gross revenue of $10,000,000 or less in the 12-month period immediately preceding the sale or transfer," with that revenue amount adjusted annually under RCW 82.87.150. "Qualifying interest" means a sole proprietorship interest, or an interest where at least 50 percent of the business is owned by the taxpayer and family, or 30 percent where two families own 70 percent or three families own 90 percent. Last amended 2025 c 409 s 6.
Washington State Legislature, RCW 82.87.070. Checked 2026-09-07.
The $10,000,000 is the statutory base and is indexed; it is not the operative test for a current-year closing. The material participation test is five of the ten years immediately preceding, not five continuous years, so a recent step-back is usually survivable; the five-year holding requirement for the qualifying interest is the stricter clock. The ownership gate disqualifies a firm held by unrelated partners who meet none of the single-family or two- and three-family thresholds, regardless of size or tenure.
RCW 82.87.150 requires that "The department must adjust the applicable amounts by multiplying the current applicable amounts by one plus the percentage by which the most current consumer price index available on October 1st of the current year exceeds the consumer price index for the prior 12-month period, and rounding the result to the nearest $1,000." The adjusted amounts include the standard deduction amount and the worldwide gross revenue amount under RCW 82.87.070. The index is the consumer price index for all urban consumers, all items, for the Seattle area as calculated by the U.S. Bureau of Labor Statistics. Adjustments begin October 2025 and occur each October thereafter, taking effect the following calendar year.
Washington State Legislature, RCW 82.87.150. Checked 2026-09-07.
The Department of Revenue states that the real estate excise tax applies to sales of real property, that "Usually, the seller pays this tax, but if they don't, the buyer is responsible," and that the tax applies to the full consideration paid. The graduated state rates, on the thresholds effective January 1, 2027, are 1.1% up to $551,000, 1.28% from $551,000 to $1,551,000, 2.75% from $1,551,000 to $3,051,000, and 3.0% above $3,051,000, with agricultural and timberland at a flat 1.28%; local REET is added. REET also applies where 50% or more of an entity's ownership interest transfers, with all transactions in a 36-month lookback combined to determine whether a controlling interest has changed hands, and a return due within five days of the transfer. The page lists chapter 82.45 RCW as the governing law for the tax.
Washington State Department of Revenue. Checked 2026-09-07.
Cited to correct a common error: chapter 82.87 RCW exempts real estate from the capital gains excise tax because Washington taxes real property transfers separately under chapter 82.45 RCW, not because a landlord's sale is untaxed. The two taxes run on different bases, price versus gain, and a company holding its office building in the operating entity can trigger both.
RCW 82.32.140(1) provides that whenever a taxpayer quits business, or "sells out, exchanges, or otherwise disposes of more than fifty percent of the fair market value of either its tangible or intangible assets," any tax payable becomes immediately due and payable and the taxpayer must file a return and pay within ten days. Subsection (2) requires any successor to withhold from the purchase price a sum sufficient to pay any tax due until the taxpayer produces a Department receipt showing payment in full or a certificate that no tax is due, and provides that if the tax is not paid within ten days of the sale the successor "shall become liable for the payment of the full amount of tax." The only cap is narrow: "If the fair market value of the assets acquired by a successor is less than fifty thousand dollars, the successor's liability for payment of the unpaid tax is limited to the fair market value of the assets acquired," with the burden of establishing that value on the successor. Subsection (4) provides that no successor is liable if it gives written notice of the acquisition to the Department and no assessment is issued against the former operator within six months of receipt of that notice, with a copy mailed or provided to the successor. Last amended 2008 c 181 s 503.
Washington State Legislature, RCW 82.32.140. Checked 2026-09-07.
RCW 51.16.200 provides that a successor "shall become liable for the payment of the full amount of tax" where the former operator does not pay within ten days of the sale, and that "No successor may be liable for any tax due from the person from whom the successor has acquired a business or stock of goods if the successor gives written notice to the department of such acquisition and no assessment is issued by the department within one hundred eighty days of receipt of such notice against the former operator." The notice period is 180 days, and the section contains no dollar cap on the successor's liability.
Washington State Legislature, RCW 51.16.200. Checked 2026-09-07.
The Department of Revenue's guidance on buying the assets of a business states that a buyer "may complete a Successorship Notice form (PDF) and provide it to the Department of Revenue to reduce your exposure to these tax liabilities," that "A buyer may also require the seller to provide a Tax Status letter, which will indicate any outstanding taxes owed by the business," and that "a successor could still be liable for unpaid taxes if the department issues an assessment within six months after receiving this form and the predecessor does not pay its tax liabilities."
Washington State Department of Revenue. Checked 2026-09-07.
RCW 82.04.4274, "Deductions—Nonprofit management companies—Personnel performing on-site functions," provides: "(1) In computing tax due under this chapter, there may be deducted from the measure of tax all amounts received by: (a) A nonprofit property management company from the owner of property for gross wages, benefits, and payroll taxes paid to, or for, personnel performing on-site functions; (b) A property management company from a housing authority for gross wages, benefits, and payroll taxes paid to, or for, personnel performing on-site functions; or (c) A property management company from a limited liability company or limited partnership of which the sole managing member or sole general partner is a housing authority for gross wages, benefits, and payroll taxes paid to, or for, personnel performing on-site functions."
Washington State Legislature, RCW 82.04.4274. Checked 2026-09-07.
A conventional for-profit third-party property management company appears in none of the three listed categories, so reimbursed on-site payroll it receives from private owners is not deductible from the B&O measure. Whether a specific arrangement qualifies should be confirmed with the Department or Washington tax counsel.
The Department of Revenue's property management services industry guide states that "Gross income for property management services is subject to business and occupation (B&O) tax under the Service and Other Activities classification," and references the RCW 82.04.4274 deduction for gross wages, benefits and payroll taxes paid to or for personnel performing on-site functions where the conditions of that section are met.
Washington State Department of Revenue, Real Estate Industry Guide. Checked 2026-09-07.
Page last reviewed 2026-09-07.
Talk to us about selling a property management company in Washington.
A no-cost valuation, and a straight answer on what your company would draw in this market. One conversation, no obligation to do anything after it.