If a piece of undeveloped land is being sold that has an agricultural use, but it is the intent to change the use to residential, then the Agricultural Transfer Tax and Surcharge applies at the point of sale. In some cases, the tax can be due where land had previously received the agricultural use assessment.
Figuring out if this tax is applicable is fairly easy by visiting the SDAT website, which identifies property accounts subject to an Agricultural Transfer Tax on its Real Property Data Search site. Property accounts subject to an Agricultural Transfer Tax will have a Special Tax Recapture area noted as “Agricultural Transfer Tax”. This notation is clearly identified in a red bold format both at the top and bottom of the property info page.
In order to get the exact figure of what is due on the Ag Transfer Tax, the local assessment office prepares a statement that contains the details of the tax and surcharge calculation. The Agricultural Transfer Tax Statement provides the total amount that will be due upon transfer and then the tax is collected by the local County Finance or Treasurer’s Office.
There is a paragraph in the Maryland contract of sale that discloses the possibility of the Ag Transfer Tax, and it has a blank line to be filled in stating who is to pay the tax. Much like transfer and recordation taxes, the Ag Transfer Tax is something that can be negotiated in a sale, so either the buyer or seller pays it, or the buyer and seller more customarily split it.
The Agricultural Transfer Tax and Surcharge are imposed on the value of the land being removed from agricultural use. The rate of the tax and surcharge are as follows:
Lauren Bunting is an Associate Broker with Keller Williams Realty of Delmarva in Ocean City, Maryland.
Lauren Bunting is a Broker with Keller Williams Realty of Delmarva in Ocean City, Maryland.
