§ 5847. Withholding on sales or exchanges of real estate

(a) General rule. Except as otherwise provided in this section, in the case of any sale or exchange of real property located in Vermont by a nonresident of Vermont, the transferee shall be required to withhold and transmit to the Commissioner within 30 days of such sale or transfer, a withholding tax equal to 2 1/2 percent of the consideration paid for the transfer. Any transferee who fails to withhold such amount shall be personally liable for the amount of such tax.

(b) Exemptions. Subject to subsection (d) of this section, no person shall be required to withhold any amount under subsection (a) of this section if:

(1) the transferor furnishes to the transferee a certificate by the transferor stating, under penalty of perjury, the transferor's Social Security number and the fact that the transferor is a Vermont resident; or

(2) the transferor or transferee has received a certificate from the Commissioner stating that:

(A) no tax is due on the gain from that transfer; or

(B) the transferor or transferee has satisfied the transferor's tax liability or has provided adequate security to cover such liability; or

(3) the transferor is a mortgagor conveying the mortgaged property to a mortgagee in foreclosure, or in a transfer in lieu of foreclosure, with no additional consideration.

(c) At the request of the transferor or transferee, the Commissioner may issue the certificate referred to in subdivision (b)(2) of this section or a certificate prescribing a reduced amount to be withheld under this section if the Commissioner determines that such reduced amount will not jeopardize the collection of the tax imposed by this chapter and the transferor is in good standing with the Department of Taxes with respect to any and all taxes. For purposes of this section, a transferor is in good standing with respect to any and all taxes if:

(1) all returns due from the transferor for any and all taxes have been filed; and

(2) no taxes are due and payable, except those on appeal.

(d) If a transferee has actual knowledge that a certificate furnished under subsection (b) of this section is false and the transferee fails to withhold the prescribed amount, the transferee shall be liable for an amount equal to the amount which should have been withheld together with penalty and interest as provided by this title.

(e) As used in this section "nonresident" of Vermont shall include individuals, trusts, partnerships, and corporations, but not estates. A nonresident individual is an individual who is domiciled outside Vermont at the time of closing. A nonresident trust is a trust that, at the time of closing, does not qualify for Vermont residency as defined in subdivision 5811(11) of this title. A nonresident partnership is a partnership, the controlling interest in which is held by nonresidents. A nonresident corporation, other than a Subchapter S corporation, is a corporation that is incorporated outside Vermont other than a corporation that has its principal place of business in Vermont and does no business in its state of incorporation. A nonresident Subchapter S corporation is a Subchapter S corporation the controlling interest in which is held by nonresidents. A nonresident limited liability company is a limited liability company the controlling interest in which is held by nonresidents.

(f) The amount withheld pursuant to this section shall be deemed to be a payment against the tax imposed by this chapter on income received by the seller.

(g) The Commissioner shall, by rule, establish a procedure by which a seller may apply for an early refund of the tax withheld when the seller establishes that no tax under this chapter will be owed or that a tax less than the amount withheld will be owed. The Commissioner shall, by rule, establish methods by which nonresident transferors may provide security in lieu of withholding.

(h) In the case of an installment sale, the seller may elect for Vermont purposes, to report the entire gain in the year of the sale and to pay a tax equal to six percent of that gain. If the seller does not make this election, the real estate withholding will be retained by the Department and applied as a credit against the seller's tax liability in each year that an installment is received. (Added 1989, No. 93; amended 1989, No. 222 (Adj. Sess.), § 9, eff. May 31, 1990; 1991, No. 67, § 26a, eff. June 19, 1991; 1995, No. 29, § 41, eff. April 14, 1995; 1997, No. 50, § 18, eff. June 26, 1997.)