Tax Resources

Q 1. What is a quick summary of California law for withholding on the sale of California real property and some exemptions?

Buyers must withhold 3 1/3 percent of the gross sales price on sales of California real property interests from both individuals (e.g., “natural” persons) and non-individuals (e.g., corporations, trusts, estates) and pay this amount to the Franchise Tax Board (FTB), unless an exemption applies (Cal. Rev. & Tax Code §§ 18662(e)(1)(A), (B), (2)(A)). 
Escrowholders must give buyers written notice of these withholding requirements.  If the escrowholder fails to give the buyer this written notice, then the buyer is off the hook for the withholding tax liability. ( (Cal. Rev. & Tax Code §§ 18662(e)(3)(B).)   Typically, the escrowholder submits both the form and money withheld to the FTB.

The information contained herein is believed accurate as of March 27, 2010. It is intended to provide general answers to general questions and is not intended as a substitute for individual legal advice. Advice in specific situations may differ depending upon a wide variety of factors. Therefore, readers with specific legal questions should seek the advice of an attorney. Revised by Sonia M. Younglove, Esq.
Copyright© 2010 CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).