Tax Type
Recordation Tax
Description
Grantor's Tax
Topic
Documents Subject to Tax
Date Issued
10-03-1989
October 3, 1988
Re: §58.1-1821 Application; Recordation Tax
§58.1-802 Grantor's Tax
Consideration or actual value
Dear***************
This is in response to your letter of August 16, 1988, in which you applied for correction of assessments of grantor's tax by the clerks of several circuit courts. The challenged assessments were imposed in the same transaction which was the subject of an application relating to the state and local recordation taxes.
Facts
The taxpayer sold many tracts of land located in numerous jurisdictions in Virginia. The sales price was negotiated on the basis of a lump sum for all of the tracts, although the contract permitted the lump sum to be adjusted for tracts rejected due to title defects, or which had been clear cut or reforested after certain dates. Most adjustments were based on a fixed amount per acre, and the amount for rejected tracts was close to the average price per acre. For convenience each subsidiary of the seller prepared separate deeds on a county by county basis for the property it held.
When the deeds were presented to the clerks for recordation the total consideration was apportioned among the deeds (i.e., among the subsidiaries and among the counties). The actual method of apportioning the consideration among the deeds and the localities is not explained, but the result is close to the average price per acre. In two of the localities, Chesterfield and Surry Counties, the clerks noted that the assessed value of the tracts in their jurisdictions was significantly greater than the consideration reported. They assessed the grantor's tax under §58.1-802 based on the assessed value instead of the portion of the lump sum sales price attributable to the acres in their jurisdiction.
Determination
The recordation taxes are imposed on the recordation of a document, not the transfer of real estate. In particular, the grantor's tax is imposed on "each deed, instrument, or writing by which lands, tenements or other realty sold is granted, assigned, transferred, or otherwise conveyed . . ." (§58.1-802, emphasis supplied.) Thus, the fact that several deeds were used instead of one may have an impact on total tax liability.
The grantor's tax is measured by the "consideration or value of the interest" exclusive of any liens remaining on the property conveyed. Previous rulings of this department and the Attorney General have construed this provision as basing the tax on the consideration if it is known. If the consideration is unknown then the tax would be based on the actual or fair market value. See Ruling dated November 19, 1986, P.D. No. 86-238 and Opinion of the Attorney General dated February 14, 1985, 1984-1985 Report of the Attorney General at page 393.
Although the consideration for the entire transaction is known (the lump sum sales price), the consideration for the land conveyed by each deed is not known. When a single deed conveys land in more than one locality, §58.1-802.B requires each clerk to collect the tax in proportion to the value of the property in each locality. Similar apportionment methods are required by §§58.1-801 and 58.1-803. In view of the General Assembly's clear preference for this method of apportionment, the lump sum sales price must be apportioned to the several deeds in the proportion that the actual, or fair market value, of the parcels conveyed by each deed bears to the total value of the parcels conveyed by all deeds. The grantor's tax should be based upon the consideration apportioned to each deed by this method.
Although the method used by the taxpayer to apportion the consideration among the deeds is not explained, it appears that the taxpayer apportioned the total sales price to the several deeds on the basis of an average price per acre without any showing that every acre is of approximately equal value.
In some instances where the total consideration for a transaction is not properly apportioned to one or more deeds conveying real estate in Virginia, or is not reported in a manner acceptable to the clerks under §58.1-812, the clerks may be justified in treating the consideration as unknown and assessing the grantor's tax based upon the actual value. This is not such a case since the total consideration does not involve any assets other than real estate in Virginia and the information necessary for proper apportionment is readily available.
Accordingly, the assessments of the grantor's tax in Chesterfield and Surry Counties should have been based upon a properly apportioned consideration. You should submit a schedule showing the amount of consideration apportioned to each county in accordance with the principles of this letter to: Supervisor, Technical Services Section, Department of Taxation, P.O. Box 6-L, Richmond, VA 23282. Upon receipt of this information the department will refund the portion of the excessive grantor's tax which has been paid over to the state treasury. You should then contact the clerks for a refund of the excessive portion of the grantor's tax retained by each locality.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner