Can the Department of Revenue collect realty transfer taxes more than once on the same sale?

by Attorney Paula J. Leicht Esq.

Paying Double Reality Taxes

A: Yes.

The Department of Revenue takes the position that an assignment of an executed agreement of sale for real property may result in double realty transfer tax because it considers the assignment a separate transaction involving the conveyance of real estate.

When a buyer buys a commercial property, but does not have a business entity formed, the buyer signs the agreement as an individual with the intention of assigning the agreement to a new business entity after the buyer is satisfied that all conditions are met.

Beware: the Department of Revenue will say that there are two transactions: the agreement of sale with the individual buyer and the assignment to the new business entity.

Ways to avoid double taxation of realty transfer tax are 1) create the business entity from the beginning in order to sign the agreement of sale; 2) revoke the original agreement of sale and enter into a new agreement after the new business entity is created; or 3) enter into a novation agreement.