California Revenue and Taxation Code Section 18662 and the related regulations require withholding of a 3 1/3% tax at the source from the sale or exchange of California real estate. The California Franchise Tax Board (FTB) has revised FTB Publication 1016, Real Estate Withholding Guidelines. The revised publication, the purpose of which is to provide guidance on the withholding requirements for sales of California real property, covers the following topics:
- General Information (e.g., definitions, a list or real estate withholding forms, what is the real estate withholding requirement, who is subject to it, when is real estate withholding not required);
- Information for Sellers (e.g., exemptions for sellers, how to calculate withholding, seller’s filing requirements, electing out of withholding on installment payments);
- Information for Buyers (e.g., the withholding requirement; how to calculate, report, and remit withholding; installment sales);
- Information for REEPs (real estate escrow persons) (e.g., their responsibilities, the withholding notification requirement, the Form 593-C (Real Estate Withholding Certificate) verification requirement, requirement to retain withholding forms);
- Information regarding Penalties and Interest.
Click here to view the updated FTB Publication 1016.