Napa County CaliforniaJOHN TUTEUR
NAPA COUNTY ASSESSOR-RECORDER/COUNTY CLERK

PROPERTY OWNER TIPS

THE DOCUMENTARY TRANSFER TAX

    Most of the closing costs associated with buying real estate are generated by the private firms who handle the sale, escrow and title guaranty portions of the transaction. There are, however, two costs which arise from the role of local government in the process. One cost is the recording fees which are based on the number of pages needed to complete the transaction , such as deeds, deeds of trust and other related documents. The other cost is the documentary transfer tax which is collected when properties change hand for consideration, i.e. cash or exchange. In Northern California the seller of the property customarily pays the transfer tax during the escrow process.

    The documentary transfer tax was originally a Federal stamp tax used to raise revenue for the Federal government. The stamps were first required in December 1914 and were used with brief interruptions until December 31 1967 when the Federal authorizing statute was repealed. The cost for stamps ranged from $0.50 for each $5,000 of value or $10.00 on a $100,000 transaction in 1914 to $1.10 per $1,000 of transaction value or $110.00 on a $100,000 transaction at the time of repeal. The document stamps were printed by the Federal Government and looked very much like postage stamps (or the stamps that used to be on cigarette packages). The County Recorder sold the stamps and then attached them to documents as they were recorded.

    When the Federal stamp act was repealed, the California Legislature authorized counties and municipalities to continue the transfer tax. Almost all counties and municipalities in the state opted to continue the tax. The tax is now collected at the time of recording, but stamps are no longer used. The municipality's share, one-half of $1.10 per thousand, is distributed quarterly by the County Auditor for properties located within their boundaries. The Documentary Transfer Tax raised almost $520,000 for Napa County in fiscal year 1996-1997 with an additional $200,000 distributed to the municipalities.

    Since the documentary transfer tax is based on a simple formula of $1.10 per $1,000, it is easy to calculate the purchase price of a property if one knows the amount of transfer taxes collected. There are three situations where this method does not work. Sometimes the tax is calculated on the full value of the transaction less liens, i.e. the buyer paid $10,000 down and assumed an existing loan of $90,000 (new loans do count towards full value). In this case, the transfer tax would be only $1.10 times $10,000 or $11.00. Someone would need to know the amount of the assumed loan(s) to know the full purchase price. In the second case, the tax will be paid on a single document which transfers several parcels of property. One would need to know the allocation of the purchase price among those parcels to determine the price of any one parcel. Finally, a buyer may file a Declaration of Transfer Tax which keeps the amount of tax paid confidential. In this case, unless someone has other access to the purchase transaction details, the only way to discover one opinion of the full market value of the property is to wait until the assessed value for property tax purposes appears on the next assessment roll.

Should you have any questions please contact Napa County Assessor-Recorder John Tuteur
at 707.253.4459 or by e-mail jtuteur@co.napa.ca.us

Copyright 1997-2008 John Tuteur, all rights reserved.
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