Some states impose a withholding requirement on the sale of property by people who are not residents of their state. Often, an exemption is available for §1031 exchanges.
CALIFORNIA
Requirement: 3.33% of the sales price withheld.
Exemption: Submitting Form 593-C (“Real Estate Withholding Exemption Certificate for Individual Sellers”) by certifying they are selling the property as part of a §1031 exchange. Non-resident sellers seeking an exemption must submit Form 593-W (“Withholding Exemption Certificate and Waiver Request for Non-Individual Sellers”) to the California Franchise Tax board.
Information: www.ftb.ca.gov or 800-998-3676
COLORADO
Requirement: 2% of the sales price on property over $100,000.
Exemption: If the seller is performing a §1031 exchange, the non-Colorado resident may sign an “Affirmation of No Reasonably Estimated Tax to be Due” on the Colorado Department of Revenue Form 1083.
Information: C.R.C. 39-22-604.5
HAWAII
Requirement: 5% of the amount realized.
Exemption: Completion of Form N-289 where the seller states they are not required to recognize any gain on the transfer because of Section 1031 exchange.
Information: H.R.S. §235-68
MAINE
Requirement: 2.5% of the consideration.
Exemption: Submitting Form REW 5 (“Request for Exemption or Reduction in Withholding or Maine Income Tax on the Disposition of Maine Real Property”).
Information: 207-626-8473 M.R.S. Title 36 §5250-A
MISSISSIPPI
Requirement: 5% of the amount realized if proceeds exceed $100,000 and the sale is not considered an exchange.
Information: M.R.S. Section 27-7-308
NEW YORK
Requirement: 7.7% of the capital gain.
Exemption: Filing Form IT-2663 before closing with the New York State Department of Taxation and Revenue.
Information: N.Y.R.S. Tax Law Article 22, Section 663
OREGON
Requirement: Exchangers sells an Oregon property and buys outside Oregon, they can defer the Oregon capital gain taxes (9%) until a taxable sale happens.
Information: O.R.S. Chapter 316 and Chapter 317
PENNSYLVANIA
Requirement: The deferral of capital gain taxes is not available and the gain is subject to a 2.8% gross receipts tax.
RHODE ISLAND
Requirement: 6% of the total payment to the seller.
Exemption: Completion of Forms 71.3, Nonresident Election of Gain and Certificate of Withholding Due.
Information: http://www.tax.ri.gov
TM 1031 Exchange and Asset Preservation, Inc. do not give tax or legal
advice. The information contained herein should not be relied upon as a
substitute for tax or legal advice obtained from a competent tax and/or
legal advisor.
(c) Copyright 2005 Stewart Title Guaranty Company
