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Bill Number: 1065 Ratification Number: 495 Act Number 424 Introducing Body: Senate Subject: Withholding on sales by nonresidents
(A424, R495, S1065)
AN ACT TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING ARTICLE 6 IN CHAPTER 9 OF TITLE 12 SO AS TO PROVIDE FOR STATE INCOME TAX WITHHOLDING ON THE AMOUNT REALIZED FROM THE SALE OF REAL PROPERTY AND ASSOCIATED TANGIBLE PERSONAL PROPERTY BY NONRESIDENTS, TO PROVIDE THAT THE BUYER SHALL WITHHOLD AND PAY OVER THE TAX, TO PROVIDE THE METHOD FOR COMPUTING AND PAYING OVER THE AMOUNTS WITHHELD, TO LIMIT THE AMOUNT REQUIRED TO BE WITHHELD TO THE TOTAL OF THE NET PROCEEDS DUE THE SELLER, TO ALLOW WITHHOLDING ON GAIN FROM THE SALE IF THE SELLER PROVIDES THE PURCHASER AN AFFIDAVIT STATING THE AMOUNT OF THE GAIN AND TO PROVIDE THAT THE SELLER MAY APPLY TO THE SOUTH CAROLINA TAX COMMISSION FOR REFUND OF EXCESS WITHHOLDING, TO PROVIDE THE TIME FOR PAYMENT, TO ALLOW THE SOUTH CAROLINA TAX COMMISSION TO EXEMPT CLASSES OF TRANSACTIONS AND EXTEND TIME FOR PAYMENT, TO PROVIDE DEFINITIONS, AND TO PROVIDE THAT THE LENDING INSTITUTION, REAL ESTATE AGENT, AND CLOSING ATTORNEY ARE NOT LIABLE FOR COLLECTING THE AMOUNT TO BE WITHHELD; AND TO AMEND SECTION 12-9-310, AS AMENDED, RELATING TO INCOME TAX WITHHOLDING, SO AS TO DELETE THE WITHHOLDING REQUIREMENT ON SALES OF REAL PROPERTY AND ASSOCIATED TANGIBLE PERSONAL PROPERTY BY NONRESIDENTS.
Be it enacted by the General Assembly of the State of South Carolina:
Withholding on sales by nonresidents
SECTION 1. Chapter 9, Title 12 of the 1976 Code is amended by adding:
Section 12-9-510. (A) In a sale of real property and associated tangible personal property owned by a nonresident, the buyer shall withhold and pay over to the commission an amount equal to seven percent of the amount realized by the seller on the sale if the seller is other than a corporation or five percent if the seller is a corporation. However, if the amount required to be withheld pursuant to this subsection exceeds the net proceeds payable to the seller, the buyer shall withhold and pay over to the commission only the net proceeds otherwise payable to the seller.
(B) If the seller determines that the amount required to be withheld pursuant to subsection (A) will result in excess withholding on any gain required to be recognized from the sale, the seller may provide the buyer an affidavit signed under penalties of perjury stating the amount of the gain required to be recognized from the sale, and the buyer shall withhold the applicable percentage of the amount of the gain required to be recognized, if any, stated in the affidavit rather than as provided in subsection (A). However, if the amount required to be withheld pursuant to this subsection exceeds the net proceeds payable to the seller, the buyer shall withhold and pay over to the commission only the net proceeds otherwise payable to the seller.
(C) If a withholding payment made pursuant to subsection (A) results in excess withholding on any gain required to be recognized from the sale, the seller may file a claim for refund of excess withholding with the commission that includes an affidavit as provided in subsection (B) and the commission shall refund the difference between the amount withheld pursuant to subsection (A) and the amount required to be withheld as provided in subsection (B).
Section 12-9-520. The commission may exempt classes of transactions from the provisions of this article and may extend the time for withholding and paying over amounts from seller financed sales when the commission determines the interest of the State is protected sufficiently to warrant the exemption or delay. The commission may also exempt classes of seller financed sales from the provisions of this article when the commission determines that the benefit the State would derive from compliance with this article is insufficient to justify the burdens on the purchaser and seller of complying with it.
Section 12-9-530. The tax withheld under this article must be paid to the commission on or before the fifteenth day of the month following the month in which the completion of the sale occurs. The commission shall develop forms for reporting and remitting.
Section 12-9-540. For the purposes of this article: 'nonresident', 'gain', 'amount realized', and the date the sale occurs are determined as they are for South Carolina income tax purposes including the adoption of Section 1001 of the Internal Revenue Code as defined in Section 12-7-20(11).
Section 12-9-550. The lending institution, real estate agent, and closing attorney are not liable for the collection of any amount due from the buyer pursuant to this article."
Existing withholding repealed
SECTION 2. Section 12-9-310 of the 1976 Code is amended by deleting the unnumbered item added by Section 55B, Part II, Act 189 of 1989.
SECTION 3. This act is effective on the first day of the second month following approval by the Governor and applies with respect to sales which are finally completed on and after that date. For sales which are finally completed before the effective date of this act, the law in effect before the effective date of this act continues to apply, except that for sales made before the effective date of this act, the seller may apply for a refund under the provisions of item (C) of Section 12-9-510 of the 1976 Code as contained in this act.
Approved the 25th day of April, 1990.