Real Estate Blog - New Alabama Law Requires Buyers To Withhold Sales Tax In Certain Real Estate Transactions

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New Alabama Law Requires Buyers To Withhold Sales Tax In Certain Real Estate Transactions

The Alabama legislature recently passed a new law that became effective August 1, 2008. Details and forms needed for compliance can be found by clicking on Act No. 2008-504.

What Does The Act Require? The buyer of a property located in Alabama, which has been obtained by sale or transfer from a nonresident of Alabama, is responsible for withholding a percentage of the sales price (or gain) and remitting to the Commissioner of Revenue of the State of Alabama on behalf of the seller. This also includes any related tangible personal property.

What If The Buyer Fails To Withhold? He becomes personally liable for the amount of tax and the purchased property is subject to a lien from the Alabama Department of Revenue.

When Is A Seller Exempt From Having Tax Withheld? A seller that meets all of the following and executes a sworn affadavit may claim an exemption by meeting the requirements to be considered a resident.

* The seller has filed an Alabama tax return for the two prior years

* The seller affirms the proceeds of the sale will be reported on the current year Alabama tax return and shall be filed on time

* If the seller is an Alabama business, the intention to continue substantially the same business in Alabama must be affirmed, and the assessed value of their real property that remains in the state after the transaction is completed is greater than the tax liability on the transaction

* If the seller is a corporation or limited partnership it must be registered to do business in Alabama

Are There Any Other Transactions Which May Be Exempt? Yes! Click here for exempt transactions.

Questions? FAQs and answers can be found here

Ann Allen Birmingham AL Realtora

Courtesy of Ann Allen, e-Pro, SRES, ASP

BIRMINGHAM AREA REAL ESTATE

205.902.4868

Keller Williams

One Chase Corporation Drive, Suite 150

Hoover, AL 35244

Ann@AnnAllenTeam.com

Posted by Ann Allen ~ SRES ASP e-PRO REALTOR® ~ Birmingham Alabama Luxury Homes on 10/08/2008 03:01 PM

Comments (11)

Seller Sales Tax in the Home Buying Channel

alabama department of revenue, act no 2008504, sales tax withholding, tax lien, buyers, sellers

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11 Comments on New Alabama Law Requires Buyers To Withhold Sales Tax In Certain Real Estate Transactions

OCT

2008

I was waiting for this to happen. This makes me feel extremely uncomfortable right now. Thank you for bringing this back into focus for me.

We have had this in Maryland for a few years now. It is a large number. The good news here is once you file your tax return and don't owe any money they refund the money to you. That is definitely motivation to file taxes early.

Ann,

Thanks for the post and heads up. I hope that we don't have this coming to Ohio.

Ann - this is great information for your customers. Good idea to post it and in language they can understand!

Barb: There is always something new that we must be aware of.

Audrey: Since this is new to us, I'm curious about how it is working out in Maryland.

Tony: My information tells me that Alabama is the 15th state to enact such legislation.

Shannon: Thanks! Does Florida have this yet?

Ann,

More taxes?? More forms.....

EEEK!

Ann

Hi Ann, how are you? I've been out of AR for a little while. Two much other stuff going on with our soldiers coming back fro Iraq. So, what's this tax thing? More taxes? I thought we had enough of them! Good to know you can get it refunded though! Better than the alternative!

Yeah, it's me again! Forget the tax subject - it's ugly! What I'm interested in are your graphics! where do you get these cool stuff you use?

OCT

2008

Hi Ann. It seems as though Alabama has created a mini FIRPTA. I hope it gets repealed. FL has on several occasions attempted to place a sales tax on services meaning it would apply to the hair stylist, interior designer, real estate commissions, etc,...oh, but not lawyers (who designed the bill). Thankfully, we Floridians stood up and said no. With the lean times in every state, lawmakers will be looking for new sources of revenue. Thanks for sharing.

Ann, the government is in AL and they're there to help? Probably a good idea to have a mortgage lender and attorney on speed dial. We have a really good legal hotline in our market by the Realtor association. Its hard to keep up with it all.

OCT

2008

It sounds like what we call HARPTA in Hawaii. It's the state version of the Federal FIRPTA.

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