Who is primarily responsible for the withholding of taxes on sales of real property owned by a non-resident?

In transactions involving the sale of real property owned by a non-resident, the buyer holds the primary responsibility for withholding taxes. This obligation arises from the federal Foreign Investment in Real Property Tax Act (FIRPTA), which mandates buyers to withhold a specific percentage of the gross sales price when purchasing property from a foreign seller. The rationale behind this regulation is to ensure that taxes related to any gain on the sale are collected, as non-residents may not have an effective means for the IRS to collect taxes directly from them after the sale.

Although other parties such as the escrow company and the listing broker can facilitate the process and provide guidance regarding the withholding requirements, it is ultimately up to the buyer to ensure that the appropriate amount is withheld and remitted to the IRS. The seller, being the individual disposing of the property, is not responsible for withholding taxes; their proceeds from the sale may be subject to taxation, but the withholding requirement itself lies with the buyer. This is a crucial aspect in real estate transactions that involve foreign sellers, reflecting the necessary compliance with tax regulations.