Title & Escrow Companies Bookkeeping in Washington

Escrow and trust account requirements in Washington are set by state law and by the underwriters you are appointed with, and they typically cover how funds are held, how frequently the account is reconciled, and what records must exist for each file. The reconciliation that satisfies all of them is the three-way: escrow bank balance, escrow book balance, and the sum of the individual file ledgers, agreeing at one point in time. Two of the three will frequently agree while the third does not, which is precisely why the third exists. The entity is registered with the Washington Secretary of State and, where the company sells anything taxable alongside closings, with the Washington Department of Revenue as well — no income tax, but the Business and Occupation tax applies to gross receipts by activity classification and is reported alongside sales tax. We keep that reconciliation current and documented; whether it meets your specific Washington obligation is a determination for you, your counsel, and your underwriter.

Washington levies a real estate transfer or deed tax at closing, which means every file passes tax collected from the parties through your escrow account to a recording authority. It is pass-through in the purest sense — never income, never expense, simply money moving across your ledger — and files that run it through revenue can overstate a title company's income by a multiple. Recording fees and any state or county surcharge behave the same way, and the settlement statement is the source document that has to reconcile to what actually left the account.

Registering to do business in Washington runs through the Washington Secretary of State, with tax accounts through the Washington Department of Revenue and employer accounts through the Washington Employment Security Department. Washington treats these as wholly independent, so being in good standing with one says nothing about the others — and the sales tax account is the one that accrues a real balance while you are not looking.

Beyond sales tax, Washington levies the Business and Occupation (B&O) Tax on gross receipts, with no deduction for cost of goods, labor, or any other expense, payable by the business. the rate depends on the activity classification — retailing, wholesaling, service, manufacturing — and a business doing more than one reports under more than one. It is filed alongside sales tax on the same return. The consequence for your books is direct: because there is no deduction for costs, a business with thin margins pays B&O in years it loses money. Revenue has to be split by activity classification in the books, or the return is guesswork. It is registered and filed separately from anything the Washington Secretary of State handles, and it accrues on revenue rather than on profit — so it is recorded as it builds, not discovered at year end.