Out of State Sellers

When property located in South Carolina is sold by a nonresident seller, the closing attorney is required by statute to withhold from the nonresident seller a portion of the seller's proceeds as an advance payment of income tax due on the sale. The nonresident seller may request a refund of any overpaid taxes by filing a nonresident tax return with the S.C. Department of Revenue.

S.C. Code of Laws - 12-8-580 defines a nonresident as (a) an individual whose permanent home is outside of South Carolina on the date of the sale; (b) a corporation incorporated outside of South Carolina, except for those corporations incorporated outside of South Carolina that have their principal place of business in South Carolina and do no business in their state of incorporation; (c) a partnership whose principal place of business is located outside of South Carolina; (d) a trust administered outside of South Carolina; or (e) an estate of a decedent whose permanent home was outside of South Carolina at the time of death.

Under the withholding statute, the seller is liable for payment of seven (7%) percent of the amount realized (gain) on the sale of the property if the nonresident seller is an individual or five (5%) percent of the amount realized (gain) on the property if the seller is a nonresident corporation. The seven (7%) percent rate also applies to partnerships, trusts and estates.

The amount of withholding tax to be collected from the seller is based on the seller's representations and the affidavit provided. The closing attorney prepares a Form I-290 for the buyer's signature and the closing attorney's office remits the withheld tax to the SC Department of Revenue.