§ 12-8-580 — Withholding by buyer of real property or associated tangible personal property from nonresident seller.

South Carolina § 12-8-580

• Jurisdiction: South Carolina
• Title 12: TAXATION
• Ch. 8: INCOME TAX WITHHOLDING

Text

(A)(1) A person who purchases real property, or real property and associated tangible personal property, from a nonresident seller shall withhold: (a) a percentage equal to the maximum individual tax rate of the gain recognized on the sale by a nonresident individual, partnership, trust, or estate and five percent for a nonresident corporation or other nonresident entity if the seller provides the buyer with an affidavit, described in subsection (E), stating the amount of gain; (b) a percentage equal to the maximum individual tax rate of the amount realized on the sale for a nonresident individual, partnership, trust, or estate and five percent by a nonresident corporation or any other nonresident entity if the seller does not provide the buyer with an affidavit described in subsection (E); or (c) the entire net proceeds payable to the nonresident seller, if the amount required to be withheld in subitem (1) or (2) exceeds the net proceeds payable to the seller. (2) If a seller finances all or part of the transaction, in lieu of remitting the tax due on each installment payment, the seller may give the buyer an affidavit stating that, for state income tax purposes, he will elect out of installment sales treatment, as defined by Section 453 of the Internal Revenue Code, and remit the entire amount of tax to be due over the period of the installment agreement. (B)(1) For purposes of this section a sale is a transfer where gain or loss is computed in accordance with Internal Revenue Code Section 1001 with modifications provided in Chapter 6 of this title for South Carolina income tax purposes. (2)(a) A sale does not include tax exempt or tax deferred transactions, other than installment sales. (b) A sale does not include a transaction to the extent the gain on the sale of a principal residence is excluded in accordance with Internal Revenue Code Section 121. Any gain in excess of this permitted exclusion is subject to the provisions of this section. (3) The department may exempt certain other classes of transactions from the provisions of this section when it determines that the benefits to the State are insufficient to justify the burdens imposed on the buyer and seller. The department may revoke the exemption granted by this item if it determines that the nonresident is not cooperating with the department in the determination of the nonresident taxpayer's correct South Carolina tax liability. The revocation does not revive the duty of a person purchasing real property or associated tangible personal property from a nonresident seller to withhold until the person receives notice of the revocation. (C)(1) For purposes of this section, a nonresident is: (a) an individual whose permanent home is outside of this State on the date of the sale; (b) a corporation incorporated outside of this State; (c) a partnership whose principal place of business is located outside of this State; (d) a trust administered outside of this State; or (e) an estate of a decedent whose permanent home was outside of this State at the time of death. (2) However, a nonresident seller is considered a resident for purposes of this section if: (a)(i) the seller is a corporation incorporated outside of this State that has its principal place of business in this State and does no business in its state of incorporation; or (ii) the seller is a nonresident who: (I) has filed at least one South Carolina income tax return and is not delinquent with respect to filing South Carolina income tax returns; (II) has been in business in this State during the last two taxable years, including the year of sale, and shall continue in substantially the same business in the State after the sale; and (III) has a certificate of authority to do business in this State if the seller is a corporation or is registered to do business in this State if the seller is a limited partnership. (b) the seller provides the buyer an affidavit described in subsection (E) certifying that the above requirements are met and that the seller shall report the sale on a timely filed South Carolina income tax return. (D)(1) The buyer shall remit the amount withheld to the department with the appropriate form on or before the fifteenth day of the month following the month in which the sale takes place. However, the department may extend the time for withholding and remitting payments for seller financed sales. (2) The buyer is liable for the collection and payment of an amount due pursuant to this section. A lending institution, real estate agent, or closing attorney is not liable for the collection of an amount due from the buyer pursuant to this section. However, a lending institution, real estate agent, or closing attorney that has in fact withheld taxes is required timely to remit the amount withheld within the timeframe provided in item (1) of this subsection. (E) The buyer may rely on an affidavit provided by the seller if the buyer does not know the affidavit is false and the seller, under penalties of perjury, states the following: (1) the seller's name, address, and social security or other federal tax identification number; (2) the date of the sale; and (3) a description of the property. (F) If a withholding payment: (1) results in excess withholding based on the amount of gain required to be recognized from the sale; or (2) contains a computational error; the seller may file an amended nonresident withholding statement with the department and request a refund for any amount over withheld or pay any amount due. (G) The department shall prescribe rules and regulations necessary to enforce and administer the provisions of this section.

Legislative History

HISTORY: 1995 Act No. 76, SECTION 2; 1998 Act No. 387, SECTION 2; 2000 Act No. 399, SECTION 3(D)(5), eff August 17, 2000; 2003 Act No. 69, SECTION 3.D, eff June 18, 2003; 2007 Act No. 110, SECTION 19, eff June 21, 2007; 2007 Act No. 116, SECTION 25, eff June 28, 2007, applicable for tax years beginning after 2007; 2024 Act No. 215 (S.577), SECTION 4, eff July 2, 2024. Effect of Amendment 2024 Act No. 215, SECTION 4, in (A)(1), in (a) and (b), substituted "a percentage equal to the maximum individual tax rate" for "seven percent".