Posted on October 28, 2023

It is personal property but do you need to collect sales tax or is the buyer required to declare it? We live in a manufactured home and lease the land it sits on.

When we sell it, what is required? Can we do the paperwork and record things ourselves, or do we have to use an agent?https://books.by/mike-young-team

The answer is;

The buyer is legally responsible for paying the sales tax on a manufactured home.

However, the transaction dynamics and state rules dictate how this tax is handled. 

New Homes vs. Used Private Sales

• Buying from a Retailer/Dealer: The buyer pays the sales tax, but the dealer is responsible for collecting it at the point of sale and remitting it to the state. The tax is usually wrapped directly into the buyer's final purchase price or financing package. 
• Buying from a Private Seller: If you purchase a used manufactured home from an individual, most states classify this as a "casual" or "isolated" sale and do not charge sales tax. Instead of sales tax, the buyer usually pays a title transfer fee or local transfer tax when registering the home in their name with the county or DMV. 
• Out-of-State Purchases: If a buyer purchases a home across state lines where the dealer does not collect local tax, the buyer must self-report and pay a "use tax" directly to their state revenue department.

Real Property Exception

If the manufactured home is permanently attached to land owned by the seller, it is legally classified as real estate (real property) rather than personal property. In this scenario, no sales tax is charged to either party. Instead, the transaction incurs traditional real estate closing costs, and the seller typically pays a local real estate transfer tax or excise tax.

What the Seller Pays

While the seller does not pay sales tax, they may face other tax obligations upon a sale:

• Capital Gains Tax: If the home was an investment property, or if the profit exceeds personal residence exclusion limits, the seller owes tax on the financial gains.
• Prorated Property Taxes: The seller is responsible for paying their portion of the annual property taxes up to the exact day of the closing.

If you are currently preparing for a transaction, let me know:

• Is the home brand new from a dealer or a used private sale?
• Is the home being sold with land, or is it sitting in a leased community/park?
• What state is the transaction taking place in?