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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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