[Legislativecommittee1] DOR meeting yesterday

Sat Jan 25 12:33:12 PST 2025

Here is the article that Maureen referenced, in PDF format.

George

George Peters, WTP

Executive Director

Washington Land Title Association

 <https://washingtonlandtitle.com> https://washingtonlandtitle.com 

Mail: PO Box 328, Lynnwood, WA 98046

Delivery: 6817 208th St SW, #328, Lynnwood, WA 98036

206-437-5869 (Mobile)

206-260-4731 (Fax)

 <mailto:execdirector at wltaonline.org> execdirector at washingtonlandtitle.com

This is a confidential communication intended solely for the named
recipient. If you are not the intended recipient, please destroy it and call
George Peters at 206-437-5869 immediately. Thank you.

From: Legislativecommittee1
<legislativecommittee1-bounces at washingtonlandtitle.com> On Behalf Of Maureen
Pfaff
Sent: Saturday, January 25, 2025 11:29 AM
To: legislativecommittee1 at washingtonlandtitle.com
Subject: [Legislativecommittee1] DOR meeting yesterday

All,

JP, Michelle, George, Carrie and I met with Rep Tharinger and two
individuals from the DOR yesterday.  In the course of the discussion the DOR
representatives made two statements that were surprising to me.  

1.	There is no need for them to issue guidance or clarification on the
correct tax treatment of recording fees because it's been available to us
online since 2013 through Det. No. 12-0374, 32 WTD 198 (September 9, 2013).
Why wasn't this brought up in the meeting we had with DOR months ago when we
explained our position?

2.	Rule 111 does not apply to Recording Fees and is not the test used
to determine their taxability.  

I asked, if the DOR has specifically ruled on this issue in 2013, why did
the audit conducted on my business in 2015 and finalized in 2016 not require
payment of back taxes on recording fees or instruction to me to collect
Sales Tax and pay B&O Tax on recording fees going forward?   It was
initially included in the assessment and the only rule they brought up to
determine taxability was Rule 111.  I successfully argued that we meet all
three tests for recording fees being qualified as advance and reimbursements
under Rule 111 which resulted in the auditor and his supervisor removing the
charges during the conference held to discuss the initial findings prior to
the audit being finalized and an assessment letter issued.  (both the
initial letter and the final assessment letter are attached)  The response
yesterday was that DOR employees are human, and humans make mistakes.  

I read the WTD from 2013 today (attached for reference) and it is mainly
focused on the tax treatment of the document preparation charges for
reconveyance fees, recording fees are mentioned one time in passing in the
seven-page document.  I would never have thought that this case clarified
the issue of taxability of recording fees had I been looking for guidance.
However, the one reference made to recording fees is that document recording
is required in order to complete the escrow services we're contracted to
provide, thereby making them a cost of doing business.  Rule 111 is
discussed throughout the document and, as that is the rule used to determine
if a fee is a qualified advance and reimbursement, I fail to see how it
isn't relevant to our discussion.

Recording fees pass all three tests:

1.	They are a customary reimbursement for an advance made to procure a
service for the client.  true

2.	They are for services that the taxpayer does not and cannot render.
true

3.	The taxpayer is not liable for the payment except as an agent for
the client.  true: An escrow company or a title company providing escrow
services is acting in the capacity of a dual agent to the principals in the
transaction.  We represent each party equally and owe them a fiduciary duty
to act as their agent in the handling of all funds and property entered into
the escrow. *

I asked for an explanation of what specifically makes the recording fees
collected and paid through escrow different from all the other items
collected and paid through escrow (REETA, loan payoffs, the net proceeds
paid out to the seller for example) so that I could better understand their
position and the response was, we aren't auditors and don't really
understand your business so we can't answer that question.  

The auditor said that same thing to me repeatedly throughout my audit (that
he didn't really understand how escrow works), so we met monthly for six
months and I answered all of his questions about the process of providing
escrow services.  He initially included recording fees in the audit findings
and said I could make my case for why they shouldn't be included during the
supervisor conference where the supervisor would discuss the tax law as they
have applied it, and changes would be made as appropriate.  Ultimately, he
and his supervisor agreed that the recording fees qualified as a
passthrough, but according to the DOR I can't rely on the findings of this
auditor as given to me on the Auditor's Detail of Differences and
Instructions to Taxpayer (attached).  

Businesses are held responsible for understanding and following the law and
the DOR says we are welcome to ask for guidance and clarification if we are
unsure of something.  Yet when presented with the findings and instructions
of their own auditors, whose job is to understand tax law and how it applies
to our business, the response is that they made a mistake.  I would like to
also point out that my audit has been brought up in at least two audits
conducted in the past four years and dismissed as being an incorrect
interpretation of the law by the current auditors - yet nothing has been
brought to my attention by DOR to alert me to this fact.  I have been
following their instructions in filing my Excise and B&O Tax returns since
receiving them and clearly, in their current view, that means I'm filing
incorrectly.  Both of these audits are languishing in a protracted appeals
process so none of us have clarity on this issue.

If the DOR believes my audit findings were wrong, should they not have come
back to me to let me know of this mistake?  At a minimum, should they not
have issued public guidance to specifically say that Recording Fees do not
qualify a pass-through expenses and why?  If they choose to audit my company
again, will they accept the answer that I was following the explicit written
instructions they gave me regarding the proper filing of our tax returns
when they see that I haven't collected sales tax or paid B&O on recording
fees?  Or will they say I shouldn't have relied on their Auditor and require
me to pay back taxes and penalties for the intervening years that I was
doing it "wrong"?  Are we, as business owners, supposed to rely on
information gleaned through the grapevine from other business owners in our
field about what their auditor told them to determine the proper reporting
of taxes?  How am I to be sure that their auditor is right and mine is
wrong?

I think at least some of our testimony on Tuesday should highlight to the
committee members that the DOR is not providing clarity in their decisions,
is not applying the law consistently from one audit to the next, and is not 

*I found a really interesting paper in the Seattle University School of Law:
digital commons by Robert C. Farrell that breaks down the Common Law Duties
of an Escrow Holder and speaks specifically to the agency duties contained
therein.  I can't find a way to download or print the document, but this
link will take you to it. https://core.ac.uk/reader/235979120

Maureen

Maureen Pfaff, President and CEO

Ph: (360) 457-4451 | Fax: (844) 513-2400

403 S Peabody St, Port Angeles, WA 98362

maureen at olypentitle.com <mailto:maureen at olypentitle.com> 

www.olypentitle.com <http://www.olypentitle.com/> 

WARNING - FRAUDULENT FUNDING INSTRUCTIONS

Email hacking and fraud are on the rise to fraudulently misdirect funds.
Please call your escrow officer immediately using contact information found
from an independent source, such as the sales contract or internet, to
verify any funding instructions received. We are not responsible for any
wires sent by you to an incorrect bank account.

ATTENTION LENDERS:  Loan packages, complete with documents and balanced CD,
must be received no later than 2:00 pm PST on the day prior to signing.

<https://ci4.googleusercontent.com/proxy/NTeYNcEClGPpwHggQhZwTEbSA0lLJUWpRPC
qETkeQth0ttOrN_jGm27ifReH9Vuc9_0=s0-d-e1-ft#https://i.imgur.com/JbY2vXS.png>

 <https://www.youtube.com/watch?v=ek4TwC9owwY&feature=youtu.be> CLICK HERE
TO WATCH VIDEO 
 <https://www.youtube.com/watch?v=ek4TwC9owwY&feature=youtu.be> ON WIRE
FRAUD PREVENTION

This electronic mail may constitute a client communication that is
privileged at law.  It is not intended for transmission to, or receipt by,
any unauthorized persons. 
If you have received this electronic mail transmission in error, please
delete it from your system without copying it, and notify the sender by
reply e-mail, so that our address record can be corrected.

-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://lists.washingtonlandtitle.com/pipermail/legislativecommittee1/attachments/20250125/dfe90a9b/attachment-0001.html>
-------------- next part --------------
A non-text attachment was scrubbed...
Name: image001.jpg
Type: image/jpeg
Size: 6078 bytes
Desc: not available
URL: <http://lists.washingtonlandtitle.com/pipermail/legislativecommittee1/attachments/20250125/dfe90a9b/attachment-0002.jpg>
-------------- next part --------------
A non-text attachment was scrubbed...
Name: image002.jpg
Type: image/jpeg
Size: 68742 bytes
Desc: not available
URL: <http://lists.washingtonlandtitle.com/pipermail/legislativecommittee1/attachments/20250125/dfe90a9b/attachment-0003.jpg>
-------------- next part --------------
A non-text attachment was scrubbed...
Name: image003.png
Type: image/png
Size: 76718 bytes
Desc: not available
URL: <http://lists.washingtonlandtitle.com/pipermail/legislativecommittee1/attachments/20250125/dfe90a9b/attachment-0001.png>
-------------- next part --------------
A non-text attachment was scrubbed...
Name: Limited Practice Officers and Admission to Practice Rule 12 Taking or Not.pdf
Type: application/pdf
Size: 96254 bytes
Desc: not available
URL: <http://lists.washingtonlandtitle.com/pipermail/legislativecommittee1/attachments/20250125/dfe90a9b/attachment-0001.pdf>