4.36 Documentary Transfer Tax

4.36.1

In General

A documentary transfer tax is a tax, also known as a deed tax, stamp tax, excise tax, realty transfer tax, or real estate conveyance tax, imposed in most states (and in some municipalities) on the transfer of real property. The payment of the tax is represented by stamps affixed or impressed on the instrument.

Until 1968, the federal government imposed a documentary stamp tax on real estate deeds and mortgage obligations, among other documents. When the federal government repealed its tax on these instruments, transfer taxes were imposed by various states and some local taxing jurisdictions.

As indicated by the different names given the tax, numerous differences exist among the states as to the exact subject matter of the tax, the rate at which it is applied, the party liable for the tax, the administrative procedures involved in its implementation, and the results of failure to comply with those procedures. In this respect, local legislation must be fully researched.

Because the tax is based on consideration given for the property, most states require that a declaration of value be filed with the recording officer. This declaration may appear on the face of the instrument, in a separate instrument, in both, or in the form of an affidavit. The responsibility for furnishing this statement generally falls on the grantee.

Failure to pay the tax does not create a lien, although it may prevent the instrument from being recorded.

Company personnel and agents should not advise customers as to the taxability or exemption from taxability of certain documents pertaining to complex transactions.