What Is Real Estate Transfer Tax ?
Real estate transfer tax has to be paid when residential, commercial or industrial property is being sold. The amount of tax increases as the size of the property increases. At times, the transfer tax is paid by seller, other times the buyer pays, and sometimes, the tax is shared by the two. |
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The amount of real estate transfer tax to be paid varies from state to state. However, there are some states in the US that do not have any laws pertaining to transfer tax. Usually the county authorities have the responsibility to collect the transfer tax, but sometimes it can be collected by the local government. In the state of North Carolina, the cities have to get special approval in order to collect the transfer tax.
Many states are now using transfer tax to protect the environment and open spaces in the states. Counties and municipalities are using transfer tax to build parks and purchase open space in communities that are seeing fast growth. However, many real estate experts say that this tends to slow the growth of the real estate market as property prices get inflated without due cause. Nonetheless, there are many communities that have actually requested the local government to impose real estate transfer tax to help fund land acquisition.
However, in some communities, real estate transfer tax has become a battleground. Take the example of Cape Cod in Massachusetts. In November 1996, 80 percent of residents living in Barnstable County passed a petition to allow the local government to charge a transfer tax on property sales. This money was to form a land bank so that open spaces could be purchased. With the passage of the legislation, 15 communities in Cape Cod could charge a 1 percent real estate transfer tax, which was to be paid by the seller of the property. However, the governor vetoed the legislature and it was returned to the residents of Cape Cod for another round of voting. This time the group comprising of state realtors, who were opposed to the tax, were well prepared and the legislature did not win the required number of votes. Today, just Nantucket and Martha's Vineyard have the rights to impose a real estate transfer tax. Similarly there are also stories about other communities where the transfer tax has either been defeated or won approval.
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