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In certain California real estate sale transactions,
the buyer must withhold 3 1/3% of the total sale price
as state income tax and deliver the sum withheld to
the State Franchise Tax Board. The escrow holder, in
applicable transactions, is required by law to notify
the buyer of this responsibility.
A buyer’s failure to withhold and deliver the
required sum may result in the buyer being subject to
penalties. If the escrow holder fails to notify the
buyer, penalties may be levied against the escrow holder.
Transactions to which the law applies are those in
which:
• the seller shows an out of state address, or
sale proceeds are to be disbursed to a financial intermediary
of the seller;
• the sales price exceeds $100,000.00; and
• the seller does not certify that he/she is a
resident of California or that the property being conveyed
is his/her personal residence, as defined in Section
1034 of the Internal Revenue Code. Note: If the seller
is a corporation, the certification would be that the
corporation has a permanent place of business in California.
For further information,
contact the Franchise Tax Board.
Revenue and Taxation Code Sections 18805, 18815, and
26131
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