Document Number
93-95
Tax Type
Recordation Tax
Description
Tax Bulletin Recordation Tax
Topic
Rate of Tax
Date Issued
03-08-1993
93-5
Tax Bulletin
STATE RECORDATION TAX


When deeds and other documents are recorded in the Circuit Court, the clerk must often determine the "actual value," a term synonymous with fair market value (FMV), to compute the proper recordation tax. Prior opinions of the Attorney General and rulings of the Department of Taxation have found that the value at which property has been assessed for real property tax purposes may have been used to determine FMV. However, while the assessed value is a valuable tool in determining the FMV, it is not controlling. The clerk may not automatically base the recording tax on the assessed value unless it is determined that the assessed value does, in fact, equal the value of the property conveyed.

There are a number of reasons why the assessed value may not represent FMV, such as:
    • 1) Significant changes that may have occurred after January 1st in the local market or in the property itself may not be reflected in the assessed value.

      2) The assessed values in a locality may be generally over or under the FMV because the locality may have used sales or other information for some substantial period prior to January 1st.

      3) The assessed value may be erroneous.
Placing a value on real estate is entirely a factual determination that is best made by one who is thoroughly familiar with the property itself and local market conditions. However, this responsibility rests with the clerk of the circuit court when the value is determined for recordation tax purposes. Although the assessed value is accorded a very strong presumption of accuracy, the clerk should not use the assessed value to the exclusion of other reliable information as to the current FMV. The courts have found that sales prices, while not conclusive, should be accorded substantial weight on the issue of fair market value.

Where the assessed value is greater than the sales price, the clerk may not automatically base recordation tax on the assessed value although it may trigger a closer examination of the proper tax to impose. The clerk must first find that there are circumstances surrounding the transaction that indicate the sales price may be less than the fair market price of the property conveyed. Examples of such circumstances may be a foreclosure deed, the relationship between the parties, the existence of a long-term lease at below market rates, etc. If such circumstances exist the clerk must make an independent determination of the FMV of the property conveyed; as noted above, the assessed value is relevant to this determination, but not controlling.

Pursuant to Va. Code §58.1-812 a clerk may ask for an affidavit or other evidence as to FMV or the circumstances of a transaction that may affect FMV. Once the clerk has determined the amount of tax imposed on a deed (which may involve a determination of FMV), the statute requires full payment of the tax prior to recordation. A taxpayer who disputes the amount of tax, and who has not been able to persuade the clerk with evidence, affidavits, etc. prior to recordation, must pay the tax and apply to the Tax Commissioner for correction of an erroneous assessment under Va. Code §58.1-1821. A taxpayer who disputes the FMV determination made by the clerk must present clear and cogent evidence to show why the value used does not reflect the FMV as of the date of the transaction.

Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46