The Washington State Court of Appeals ruled on July 14, 2026, that Chicago Title Insurance Company must pay taxes on its title insurance and escrow services provided to Washington residents. The court reversed a previous decision that favored Chicago Title, stating that the company's services should be sourced to Washington rather than its out-of-state offices. This ruling affects how title insurance companies conduct business in Washington and may have broader implications for similar businesses operating remotely.
The case, Chicago Title Insurance v. State Revenue, No. 59809-4-II, centers on the tax obligations of Chicago Title, which provides title insurance and escrow services for real estate transactions. The Washington State Department of Revenue argued that Chicago Title's remote services should be taxed in the state where the services are received, which is Washington in this case. The court's decision emphasizes the importance of where services are utilized rather than where they are processed.
Chicago Title operates as a national title insurance company, offering services that include title insurance, abstract services, and escrow services. These services are crucial in real estate transactions, ensuring that property titles are clear of defects and that funds are properly managed during sales or refinancing. In recent years, the company transitioned to remote operations, utilizing electronic databases instead of relying on local offices to provide services. This shift allowed them to conduct business from out-of-state locations, which became the crux of the tax dispute.
The dispute arose after the Department of Revenue audited Chicago Title for the period from January 1, 2009, to December 31, 2012. The audit revealed that Chicago Title had underreported its income from Washington sales, leading to an assessment of over $8 million in unpaid taxes, penalties, and interest. Chicago Title contested this assessment, arguing that its sales should be sourced to its out-of-state offices, where the services were processed.
The trial court initially sided with Chicago Title, concluding that the services were properly sourced to the remote locations under RCW 82.32.730(1)(a). However, the Department of Revenue appealed this decision, arguing that the trial court misinterpreted the law. The court noted that the statute clearly indicates that if services are not received at the seller's business location, they should be sourced to where the purchaser makes first use of those services.
In its ruling, the Court of Appeals stated, "The plain language of the statute unambiguously supports that the sales should have been sourced to Washington under RCW 82.32.730(1)(b)." This statement highlights the court's interpretation that the services provided by Chicago Title were utilized in Washington, where the real estate transactions took place, rather than the out-of-state offices where the work was processed.
The court's decision has significant implications for Chicago Title and potentially other companies providing remote services. It clarifies that businesses must consider the location where services are utilized when determining tax obligations. This ruling may lead to increased tax liabilities for companies that operate in a similar fashion, as they may now be required to source their sales to the state where their customers are located.
Going forward, this ruling could set a precedent for how tax laws are applied to remote services in Washington. It emphasizes the need for companies to comply with state tax regulations, regardless of where their operations are based. The ruling could also encourage other states to examine their tax laws concerning remote services, potentially leading to changes in how businesses operate across state lines.
As for the next steps, Chicago Title may consider appealing the decision or addressing unresolved issues related to tax calculations with the superior court on remand. The company has indicated that it preserved a computational issue during the trial, which the court did not address in this ruling. This means there may still be further legal proceedings to clarify the financial implications of the court's decision.