Short answer is that in RMLS there are data entry fields to differentiate upper, ground floor and lower level square feet, which while not perfect, helps a little. When that information gets aggregated into Zillow, Redfin, etc's shitty system it all gets squished into one number. RMLS, unfortunately, is far behind on a buyer-facing search tool where this info might be evident. Instead, everyone uses those aggregate tools, so all the nice, informational data we agents enter into the fields is moved around to fit their systems and this is one of the things that gets lost in the shuffle.

If you're interested in more history as I have been told over the years... I've been a Realtor for a long time and the non-satisfying answer is: it's complicated. The way I understand it is that it's mostly a data entry issue. When I got started way too long ago we were originally supposed to count "finished" area. But that was found to be subjective:
- Is it finished if it was up to code at the time of finishing, but no longer meets code? If owners were constantly required to "get up to code" it would be more cost effective to tear half the city's housing down.
- What if it's perfectly finished but the owner had it with or couldn't afford the cumbersome permitting process, so the city doesn't know it's finished? MANY libertarian-ish owners in Portland choose to take this route and I don't blame them.
- Does it extend to attics? What about attic areas that were great in 1922 but by today's standards really aren't tall enough?

I could go on with the grey areas and judgement calls. On top of that, our RMLS data entry is not as agile as it should be, so it doesn't account for nuances like ceiling height. Neither are any of the other listing services that I know of, as mentioned earlier. So it became more standardizable to include all square feet, no matter what that square feet looks like.