January 1st 2008

Non-Resident Sales Tax Now

With-holding at  Settlement

West Virginia Code §11-21-71b was enacted during the 2007 legislative session.  It requires the real estate reporting person (the settlement agent) to withhold tax from the proceeds from the sale of real property owned by a non-resident person or entity, and to pay the tax over to the Tax Commissioner within 30 days of the date the amount was withheld.  "Date withheld" is not defined within the section, but it can be presumed to be the settlement date.

The amount of tax to be withheld is 2 ½% of the net proceeds of sale, or, in the alternative, 6 ½% of the estimated capital gain derived from the sale (or exchange).

The effective date of this statute is January 1, 2008.

There are exemptions from the requirement.  If the transferor certifies under penalty of perjury that he/she/they/it are exempt, no tax need be withheld.  The certification may be set forth in recitals in the deed or in an affidavit recorded with the deed.

Exemptions include:

1.  Transfers by residents;

2.  Transfers pursuant to a foreclosure or deed in lieu of foreclosure, including the resale by the mortgagee to a subsequent purchaser;

3.  Transfers by the USA, the State of WV, or any political subdivision;

4.  Transfers of the principal residence of the transferor(s);

5.  Transfers for zero consideration.

The statute is attached for reference.  You should begin incorporating the certification in all deeds beginning January 1.

The Tax Commissioner is, by statute, to provide forms for reporting the amount of tax withheld as well as forms for certifying the seller is not subject to taxation.  At this time, however, the Tax Commissioner has not published the forms to be used.  We will advise you further as soon as the forms become available.  Until that time, we recommend that if a transaction is subject to the withholding tax, you should collect it and retain it in a separate account.

West Virginia Code §11-21-71b  (Click Here to View)

Note:   Copy and distribute this bulletin to your escrow officers, title examiners, title officers, searchers and anyone else that you feel should know about it.

References 
Bulletins Replaced:                   None.
Related Bulletins:                      None.
Underwriting Manual:               None.
Exceptions Manual:                  None.
Forms:                                     None.