Washington State capital gains tax denied U.S. Supreme Court review

Taxpayers should examine if they’re affected by the U.S. Supreme Court’s decision to decline the appeal by capital gains excise tax opponents.

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On Jan. 16, the U.S. Supreme Court denied certiorari in Quinn v. Washington, the lawsuit that challenged Washington state’s capital gains excise tax. 


The excise tax passed by the Washington State Legislature in 2021 imposes a tax on the sale of long-term capital assets, which is measured on capital gains exceeding $250,000. On March 24, 2023, the lawsuit Quinn v. Washington challenged the constitutionality of the tax arguing that the tax constitutes a property tax which violates the uniformity clause of the Washington State Constitution. The Washington Supreme Court ruled that the tax is properly an excise tax since it is the sale of capital assets being taxed, not the capital gains recognized on the sale. As an excise tax, the capital gains tax passed constitutional muster and could be enforced by the Washington Department of Revenue. 

Denial of certiorari 

The plaintiffs in the case petitioned the U.S. Supreme Court for review of the Washington Supreme Court’s August 2023 decision, arguing that if the tax is an excise tax, it violates the Commerce Clause of the U.S. Constitution as transactions occurring outside of Washington state by Washington residents would be unconstitutionally taxed. Petitioners asserted that the decision of the Washington Supreme Court conflicted with prior decisions of the 9th U.S. Circuit Court of Appeals (Washington state is in the 9th Circuit), resulting in a decision split within the circuit that only the U.S. Supreme Court could resolve. The U.S. Supreme Court did not provide a reason for declining to review the case in its order. 

Effect of denial 

Review by the U.S. Supreme Court was the last option for redress through the court system. There remains the possibility of a ballot initiative to resolve taxpayers’ complaints about the tax. As of Jan. 23, the campaign “Let’s Go Washington” has collected enough signatures to challenge the excise tax via a ballot initiative. While further action regarding the initiative is pending, the tax remains in full effect at present time. 

What does CohnReznick think?

Barring legislative change due to the ballot initiative or a change in the makeup of the Washington Legislature, the capital gains excise tax is in force indefinitely. The Washington Department of Revenue began enforcing the tax following the Washington Supreme Court’s decision in the case. Given the still relative newness of the tax, taxpayers who are Washington State residents, partners/members in Washington State pass-through entities, or who own capital assets located in Washington State should be cognizant of whether they are impacted. Given the multiple deductions, credits, and exemptions available, taxpayers are encouraged to seek assistance from their tax advisors regarding their capital gains tax liability. 


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corey rosenthal

Corey Rosenthal

JD, Principal, Practice Leader, State and Local Tax (SALT) Services

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Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.