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Out of State Seller Withholding

When you purchase real property located in South Carolina or real property and associated tangible personal property located in South Carolina, and you buy from a nonresident seller, you are required by statute to withhold from the nonresident seller a portion of the seller's proceeds as an advance payment of income tax due on the sale. The nonresident seller may request a refund of any overpaid taxes by filing a nonresident tax return with the S.C. Department of Revenue.

S.C. Code of Laws - 12-8-580 defines a nonresident as (a) an individual whose permanent home is outside of South Carolina on the date of the sale; (b) a corporation incorporated outside of South Carolina, except for those corporations incorporated outside of South Carolina that have their principal place of business in South Carolina and do no business in their state of incorporation; (c) a partnership whose principal place of business is located outside of South Carolina; (d) a trust administered outside of South Carolina; or (e) an estate of a decedent whose permanent home was outside of South Carolina at the time of death.

Under the withholding statute, the purchaser is liable for the collection and payment of seven (7%) percent of the amount realized on the sale by the nonresident seller or five (5%) percent of the amount realized on the sale if the seller is a nonresident corporation. The seven (7%) percent rate also applies to partnerships, trusts, and estates. If the nonresident seller desires, they can provide an affidavit to the buyer stating the amount of gain seller will have on the
sale. Upon receipt of the South Carolina Tax Withholding Affidavit, the buyer is authorized to withhold tax based on the amount of gain realized instead of the total amount realized on the sale. The smaller the gain, the smaller the amount withheld for withholding tax and the larger the seller's proceeds check at closing. Under the statute, the buyer may rely on the affidavit as provided by the seller if the buyer does not know the affidavit to otherwise be false.

The amount of withholding tax to be collected from the seller is based on the seller's representations and the affidavit provided. The closing attorney prepares a
Form I-290 for the buyer's signature and the closing attorney's office remits the withheld tax to the SC Department of Revenue on or before the fifteenth day of the month following the month in which the sale took place

1) Form I- 295 Seller Withholding Affidavit
2) Form 1-290 Nonresident Withholding Form
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