Many homeowners aren’t aware that the State of Maryland will collect a tax from a seller, at settlement, if they (or their trust, estate, or business) is not a resident.

The code states:

“Section 10-912 of the Tax-General Article, Annotated Code of Maryland, that if seller is: 1) a non-resident individual of the State of Maryland or is 2) a non-resident entity which is not formed under the laws of the State of Maryland and is not qualified by or registered with the State Department of Assessments and Taxation to do business in the State of Maryland, the deed or other instrument of writing that effects a change of ownership to the property may not be recorded with the cork of the court for a county or filed with the maryland State Department of Assessments and Taxation less payment is first made by the seller in an amount equal to

a) 7.5% of the total payment to a non-resident seller;  OR

b) 8.25% of the total payment to a non-resident entity

NOTE: The amount of the payment for a non-resident individual is subject to adjustment on a recurring basis by the Comptroller of Maryland. The amount of the payment for a non-resident entity is subject, from time to time, to change by an Act of the Maryland General Assembly. Seller acknowledges that the amount (s) as set forth in a) and b) above may be greater or lesser than the actual amount (s) due by seller at time of settlement.

UNLESS each seller:

  1. Certifies, in writing, under the penalties of perjury, that the seller is a resident of the State of Maryland or is a resident entity of the State of Maryland; OR
  2. Presents to the clerk of the circuit court for a county or the Maryland State Department of Assessments and Taxation certificate issued by the Comptroller of the State of Maryland stating that: i) there is no tax due in connection with the sale or exchange of the property; or ii) a reduced amount of tax is due from the seller and the reduced amount is collected by the clerk of the circuit court for a county or the Maryland Department of Assessments and Taxation before recording or filing; (NOTE: if seller intends to obtain a certificate from the Comptroller’s office, seller should immediately contact the Comptroller at 1-800-MDTAXES. Obtaining the certificate requires a MINIMUM of three (3) weeks); OR
  3. Has satisfied the tax liability or has provided adequate security to cover such liability; OR
  4. Certifies, in writing, under the penalties of perjury, that the property being transferred is the seller’s principal residence. “

 

Application for Withholding Exemption

MD Withholding Requirement FAQ