Issue Date: August 2, 2005 This is the policy of the Department and is applicable to all open tax years. RE: Single Member Limited Liability Company and O.C.G.A. § 48-7-128. O.C.G.A. § 48-7-128 provides for a withholding tax on the sale or transfer of real property and associated tangible personal property by nonresidents. O.C.G.A. § 14-11-1104 provides that each limited liability company shall be classified as a partnership for Georgia income tax purposes unless classified otherwise for federal income tax purposes, in which case the limited liability company shall be classified for Georgia income tax purposes in the same manner as it is classified for federal income tax purposes. Internal Revenue Service Regulation § 301.7701-2 (a) provides that a business entity with only one owner is classified as a corporation or is disregarded: if the entity is disregarded, its activities are treated in the same manner as a sole proprietorship, branch, or division of the owner. Question 1: Is a single-member limited liability company (“SMLLC”), whose status is disregarded for federal income tax purposes, considered to be the seller for purposes of O.C.G.A. § 48-7-128? Answer 1: O.C.G.A. § 14-11-1104 is clear that the federal classification for income tax purposes applies for Georgia income tax purposes. Since O.C.G.A. § 48-7-128 is the withholding of income tax, the federal classification also applies for income tax withholding purposes. Accordingly, a SMLLC whose status is disregarded for federal income tax purposes is not considered the seller for purposes of O.C.G.A. § 48-7-128. Instead the owner of the SMLLC is considered the seller for purposes of O.C.G.A. § 48-7-128. Question 2: Is a buyer required to inquire as to whether a LLC-seller is a “disregarded” entity? Answer 2: O.C.G.A. § 48-7-128 requires the buyer to withhold tax on the sale or transfer of Georgia real estate by a nonresident. In order to withhold, the buyer must determine if the “seller” is a nonresident. Inherent in this provision is the need to properly determine the “seller” of the property. As such, the buyer must inquire as to whether the LLC-seller is a disregarded entity in order to properly determine the seller. Please note: The purpose of a policy statement is to provide interpretive guidance to dealers, the general public and governmental employees. A policy statement is a position statement, which provides interpretation, details, or supplementary information concerning the application of the law. Relevant statute, case law, or rules and regulations, as well as subsequent policy statements may modify or negate any or all of the provisions of any policy statements. Back to Policy List |