Tax Type
Recordation Tax
Description
Property with improvements; Basis of tax
Topic
Documents Subject to Tax
Date Issued
08-14-1990
August 14, 1990
Re: Virginia Code §58.1-1821 Application Recordation Tax
Dear**************
This is in reply to your letter protesting the assessment of recordation taxes by the Department of Taxation.
FACTS
**********(Bank) purchased property and held the property in its name until such time that the property was sold. Your firm, on behalf of *********** (Developer) would record two instruments at the time of the sale to the ultimate purchaser. The first instrument was a deed from the Bank to the Developer for the lot only. The second instrument was a deed from the Developer to the eventual purchaser for the lot and all improvements made by the Developer. Both instruments carried the same date, were notarized at the same time and were recorded one directly after the other.
The recordation taxes paid on the first deed conveying the lot from the Bank to the Developer were based upon the consideration paid for the lot only. After the deeds were recorded, the Clerk of the Circuit Court for the City of Virginia Beach (Clerk) determined that taxes should have been paid based upon the value of the property at the time of conveyance, because at the time the deed was recorded, the lot already had improvements upon it. Upon demand by the Clerk, the Bank remitted the grantor's tax on the transactions. After your firm refused to remit additional recordation taxes based upon the difference between the consideration and the value of the property at the time of the recording, the department issued an assessment for the recordation taxes due. It is this assessment that you protest.
DETERMINATION
Virginia Code §58.1-801 imposes a tax on the recording of every nonexempt deed admitted to record. The tax is imposed at the rate of 15 cents on every $100 or fraction thereof on "the consideration of the deed or the actual value of the property conveyed, whichever is greater." (Emphasis added.) At the time that the deed conveying the lot from the Bank to the Developer was recorded, improvements had been constructed upon the lot. Therefore, at the time of the recording, the actual value of the property conveyed was more than the consideration paid for the unimproved lot. Based upon the above language found in Virginia Code §58.1-801 and supported by the attached opinion of the Attorney General (July 6, 1987 to the Honorable Ronald P. Livingston), the recordation taxes should have been paid based upon the actual value of the property, including the value of any improvements.
You protest the assessment on the grounds that, even if additional taxes are due, your firm would not be responsible for the tax since they were not parties to any of the deeds in question.
The recordation tax is not a tax on the transfer of real estate, but on the recordation of a document. It is a "tax on the civil privilege of being allowed to avail oneself of the benefits and advantages of the registration laws of the state." Pocahontas Consolidated Collieries Co., Inc., v. Commonwealth, 113 Va. 108, 73 S.E. 446 (1912). Since your firm exercised the privilege to record the deeds in question and provided the information which resulted in the collection of insufficient tax, your firm is ultimately responsible for the tax. The department expresses no opinion as to whether your firm may recover the tax assessed from the parties to the deeds.
You contend that since the Clerk admitted the deeds without the payment of the full amount of taxes, additional taxes may not be assessed. You rely on the Virginia Supreme Court decision in the Pocahontas case. However, the 1978 General Assembly amended the recordation tax law to specifically grant authority to the Department of Taxation to assess tax after a deed has been recorded. 1978 Acts of Assembly, Chapter 693, recodified as §58.1-813. Therefore, in this case, I find that the department had the authority to assess the additional taxes.
Virginia Code §58.1-813 gives the department the authority to assess and collect the unpaid tax in the same manner and by the same methods used for the collection of any state tax administered by the department. Therefore, the statutory limitations found under Virginia Code §58.1-104 for the assessment of taxes is applicable to the assessment issued by the department. Accordingly, no additional tax may be assessed for recordings that took place more that three years from the date of the department's assessment. An adjusted notice of assessment will be issued. Please pay the amount shown on the adjusted assessment within thirty days of receipt of the revised assessment.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner