Capital gains litigation
In March of 2022, the Douglas County Superior Court ruled in Quinn v. State of Washington that the capital gains excise tax (ESSB 5096) does not meet state constitutional requirements and, therefore, is unconstitutional and invalid. The State has appealed the ruling to the Washington Supreme Court.
While the appeal is pending, the agency was granted a stay of the Douglas County ruling. The stay does not resolve the issues surrounding the constitutionality of the capital gains tax, but it does preserve the agency’s ability to effectively administer and implement the tax and meet statutory obligations, including accepting tax payments, pending a final decision from the Washington Supreme Court. As a result, the online system will be made available to taxpayers to report and pay the tax. The system is targeted to go live in February 2023. If the Court eventually finds the statute to be unconstitutional, any tax payments received will be promptly refunded with interest.
The Department will continue to provide guidance to the public regarding the tax as a courtesy. Any guidance provided herein will apply only if the tax is ruled constitutional and valid, in its entirety, by a court of final jurisdiction.
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