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+--- Thread: Sales Tax when you sell property (/showthread.php?tid=1328)
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Sales Tax when you sell property - handsoff - 08-22-2007
Bonjour
Can someone confirm that property sales are subject to a sales tax of either 5% for US citizens and 15% for non-citizens?
I am an American living in Europe with a lot in HPP that I have sold and is now in escrow. I am told I must pay 5% of the selling price as sales tax. I have sold property in many states but never paid a sales tax.
Sorry if this issue has alreday been explained.
RE: Sales Tax when you sell property - leifgn - 08-22-2007
Hello Handsoff
I sold a property on Maui a few years ago. The state charged a tax of 5% and the Feds charge 10% as far as I can remember. But you get most of these taxes back when you file your tax return. Also, you can apply on the State level to get some of your state taxes back sooner. Not as bad as it seems.
Good luck, Leif
RE: Sales Tax when you sell property - sansei - 08-23-2007
You can look up the IRS rules by searching FIRPTA on the IRS website(Form 8288(x)). You can search HARPTA on the Hawaii tax site(form n288(x)). You can also look up the exemption forms to see whether you qualify.
These are not sales taxes, they are withholdings on the (potential) gains from the sale of assets. Lief is correct that the FEDS w/h 10% and HI 5%. You can get a credit for the witholdings when you file your income tax returns just as you are credited for the withholdings on your paycheck for regular income.
Larry
RE: Sales Tax when you sell property - John S. Rabi - 08-23-2007
It's not a tax, it's a tax withholding. The State of Hawaii is making sure you pay yor capital gain taxes!
C-38 and C-39 of your Purchase Contract includes this provision. Escrow is required to withhold this money and send it to the appropriate authorities after 14 days. Your CPA will need to file a Hawaii tax return on the sale. If your capital gain is more than the withheld 5% than you will have to pay the difference. If it's less than the withheld 5% the State will refund the difference. Since you are a US citizen, C-39 FIRPTA (10%) does not apply to you. However, you will have to go to the US Embassy where you live now and they will have to notarize your deed and escrow papers.Aloha,
John S. Rabi, ABR,CM,CRB,FHS,RB
http://www.JohnRabi.com
Typically Tropical Properties
"The Next Level of Service!"
RE: Sales Tax when you sell property - mella l - 08-23-2007
John you are a wealth of knowledge. Thanks for helping us out, for sharing so much with us, whether it is cats, investments or property, keeping us honest, or at the very least talkin and squakin!
Aloha,
Mella
mella l
RE: Sales Tax when you sell property - ericlp - 08-23-2007
quote:
It's not a tax, it's a tax withholding. The State of Hawaii is making sure you pay yor capital gain taxes!
Smells like a SCAM to me.
Must be the line you tell all your out of state investors? Hmmm, if it's such a cool idea then why don't the make Hawaiian residents pay it too? Why the double standard? Who's making CASH from this?
BTW, I've sold property in two other states and as far as I know hawaii is the only state that does this BS...
RE: Sales Tax when you sell property - jdirgo - 08-23-2007
The money goes directly to the State of Hawaii. We always tell people who live out of state who are purchasing property that, should they still be non-Hawaii residents when they decide to sell, they will be subject to this withholding.
Hawaii may be somewhat unique in this withholding. I would imagine that the reason that they don't do this for residents is because residents already file income tax forms in the state and those income tax forms include sales of property. It would be relatively easy for the state to catch if someone who lives here and files tax returns failed to report it, since the state is also the one that records transfers. For an out-of-state resident, even if they did catch it (and I imagine they would) it would require taking the person to court for the state to get its proper capital gains tax.
And FIRPTA is federal law for non-US citizens. Hawaii has nothing to do with that -- take it up with the IRS.
John Dirgo, R, ABR, e-PRO
Aloha Coast Realty, LLC
808-987-9243 cell
http://www.hawaiirealproperty.com
RE: Sales Tax when you sell property - Jody - 08-23-2007
Here's some info:
http://www.seyfarth.com/dir_docs/news_item/8a1bdbcd-2cdf-41e0-97e2-a0335fe8907f_documentupload.pdf
The article is from 11/05, so the information may not be current.
RE: Sales Tax when you sell property - John S. Rabi - 08-23-2007
Smells like a SCAM to me.
Must be the line you tell all your out of state investors? Hmmm, if it's such a cool idea then why don't the make Hawaiian residents pay it too?
Scam?! Eric, too many sellers "bailed" on paying the capital gains tax to the State of Hawaii and that's why the law was enacted. Again, it's not a payment, it's a withholding and as the other John pointed it out, it's not withheld from the residents because we file State of Hawaii tax forms.
Aloha,
John S. Rabi, ABR,CM,CRB,FHS,RB
http://www.JohnRabi.com
Typically Tropical Properties
"The Next Level of Service!"
RE: Sales Tax when you sell property - handsoff - 08-23-2007
Thanks for everyone's input - very helpful.
I understand now that it is a witholding. Just means more paperwork for me. As an expat with a low salary I come under the $82,000 Federal income exclusion which means I basically, don't have to file any state income tax forms since my US income is 0. (I know this isn't exactly correct but it is what I do.)
Again, thanks for the input.