No, an Alabama resident does not need to provide an affidavit since this withholding law does not apply to residents. The affidavit is for nonresident sellers who wish to be “deemed” residents for withholding purposes. In a transaction where a nonresident seller is considered a “deemed resident” of Alabama, the buyer should retain a copy of the affidavit, and must submit the original copy to the Alabama Department of Revenue. Even though an affidavit is not required when the seller is an Alabama resident, the affidavit may be used by a resident seller if the buyer wishes to document the seller’s representation of Alabama residency. In this situation, the affidavit does not need to be sent to the Alabama Department of Revenue, but the buyer and seller may wish to keep copies for their records.
No. It is not subject to the withholding requirements of Section 40-18-86. However, if the buyer and seller agree, the buyer may withhold on the interest.
An installment sale made by a nonresident is subject to the requirements of Section 40-18-86. The initial payment of the withholding is calculated based on the purchase price less the installment note. If the seller wishes to base the withholding on the gain, the withholding is calculated on the gain that would be recognized as a result of the proceeds received at the time of the closing. The provisions of the law regarding the percentage to be withheld and the due date to file the payment voucher and make the withholding payment to the Alabama Department of Revenue apply to installment sales in the same manner as applicable to any other sale subject to withholding under Section 40-18-86. For subsequent payments, the withholding is calculated by applying 3 or 4 percent of the principal amount included in each payment, or if the gain is used to calculate withholding, by applying 3 or 4 percent of the amount of each principal payment which represents gain. The payment voucher must be filed and the payment remitted to the Department on or before the last day of the calendar month following the calendar month within which the cumulative amount withheld for the year, less any payments already made for the year, exceeds $100. If the cumulative amount withheld for the year, less any payments already made, does not exceed $100 for the calendar year, the buyer will file the payment voucher and remit the payment to the Department on or before the last day of the month following the end of the calendar year within which the tax was withheld.
If the relocation company is a nonresident entity and is listed on the closing statement as the seller, then the relocation company is subject to the requirements of Section 40-18-86.
Alabama law requires the buyer to withhold tax on the sale or transfer of Alabama real estate by a nonresident. In order to withhold, the buyer must determine if the “seller” is a nonresident. Inherent in this provision is the need to properly determine the “seller” of the property. As such, the buyer must inquire as to whether the LLC-seller is a disregarded entity in order to properly determine the seller.
The federal classification for income tax purposes applies for Alabama income tax purposes. Since Section 40-18-86 is the withholding of income tax, the federal classification also applies for income tax withholding purposes. Accordingly, a SMLLC whose status is disregarded for federal income tax purposes is not considered the seller for purposes of Section 40-18-86. Instead, the owner of the SMLLC is considered the seller for purposes of the Alabama law.
If the seller or transferor has filed Alabama returns or appropriate extensions for the most recent two tax years whose original due dates have passed, then that condition will be considered satisfied.
