Proposed New Tax Requirement on Real Estate Sales

The current draft of the Fiscal Year 2009 Massachusetts House Budget proposes a new obligation on real estate sales. Section 11 of H4000 Outside Sections (7L Sections) would impose a new requirement on non-resident taxpayers being obligated to make an estimated tax payment at the time of the sale of real estate in Massachusetts.

SECTION 11. Chapter 62B of the General Laws is hereby amended by inserting after section 13 the following section:-

Section 13A. The commissioner may require a taxpayer, or a person paying, crediting or allocating an amount to a taxpayer, to make estimated tax payments on amounts the taxpayer is reasonably likely to receive. The commissioner may require a minimum estimated tax payment and may require payment on or before the date of receipt of income. The commissioner may, for example, exercise this authority to require a nonresident taxpayer to estimate and pay, on or before the time of sale, the income tax liability on the gain from the sale or transfer of real property in the commonwealth. The commissioner may issue regulations governing the administration of this section. In the event of a sale, transfer or disposition of property, a lien in the amount of any required estimated payment shall arise with regard to the property, to the extent provided by regulation, if such a required estimated tax payment is not timely made.

It is strange that Massachusetts is setting this up as a payment of estimated taxes, rather than a withholding requirement. Many other states have withholding requirements: California, Maine, Oregon, South Carolina, Vermont, (This was not meant to be an exhaustive list; just some examples that came up in a Google search.)

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