CA 3% Sales Tax on Property Sales?

5 Replies

I assume this is the right forum for this question.  Perhaps someone can help me better understand.

I think CA passed a 3% sales to the state on the sale of a residential real estate sale.  Is that accurate?

Well, does it apply to wholesaling?  If so, what sales number is the 3% factored from?  Is it 3% of the A-to-B sale?  3% of the B-to-C sale?  BOTH???

I'm about to get into a wholesale deal, but this taxation situation might play a serious role in how it gets done, if at all.

Thanks!!!

You can research it yourself, but I think what you are referring to is actually an advance withholding mechanism on any income or franchise tax that would be due IF there is gain on the sale of the property to the seller.

If it's an excise tax every time title transfers, then you'll have what WA does (1.7%) and Philly does (4%). 

We assign only, obviously.  Own it for 2 seconds? 3.4% of gross goes poof.

If it's just an extra profit or  cap gain tax, it will be much less in absolute $ at least.  WA is exploring one of those also, but not for houses.  Will move up my commercial sales timeline if they get serious.  Our state is trying to make up for 0 income tax. Your state?  Just mo money!

@Jake Goehring   The good news is it's not actually an extra tax.  It's more of prepayment of tax that may be owed to the state.  You, as the wholesaler, would generally not be effected by it.  It could effect the seller, but even then there are a number of exemptions that may come into play (i.e. the sale of property is for less than $100,000; the sale of property at a net loss for income tax purposes; the property qualifies as the seller's principal residence; etc).

Here's some more reading on the subject if you're interested, but it shouldn't be a big deal:

Withholding on California Real Estate

California Withholding Tax on the Sale of Real Property

Kyle thanks for the share. Good to know.

Thanks all!  Appreciate the input and insight

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