When is a seller exempt from Georgia real property withholding, and can a disregarded LLC seller rely on its owner?

What the statute requires of the buyer

Section 48-7-128(b)(1) applies "in the case of any sale or transfer of real property and related tangible personal property located in Georgia by a nonresident of Georgia." The buyer "shall be required to withhold and remit to the commissioner on forms provided by the commissioner a withholding tax equal to 3 percent of the purchase price or consideration paid for the sale or transfer." Two limits follow in the same paragraph. If the amount to be withheld exceeds "the net proceeds payable to the seller or transferor," the buyer withholds and pays over "only the net proceeds otherwise payable." And "Any buyer or transferee who fails to withhold such amount shall be personally liable for the amount of such tax." The buyer files the return and remits the tax "on or before the last day of the calendar month following the calendar month within which the sale or transfer giving rise to the withholding tax occurred" (section 48-7-128(f)).

The base can be reduced to the gain. If withholding on the price "will result in excess withholding on any gain required to be recognized from the sale," the seller may provide "an affidavit signed under oath swearing or affirming to the amount of the gain required to be recognized," and the buyer then withholds "3 percent of the amount of the gain required to be recognized, if any, stated in the affidavit" (section 48-7-128(c)). The Department's example of that affidavit is Form IT-AFF2, Affidavit of Seller's Gain, which works from sales price, cost basis including improvements and selling expenses to a net taxable gain, and tells the seller to "retain the documentation of the cost basis, depreciation, and selling expenses claimed" (Form IT-AFF2, Rev. 12/11). Because withholding can rest on the recognizable gain, the Department's guide treats a transaction producing no taxable income as needing no withholding (Withholding Requirements for Sales or Transfers of Real Property by Nonresidents, Rev. 11/11, the "Rev. 11/11 guide").

The regulation fills in the rest. Ga. Comp. R. & Regs. 560-7-8-.35(1) lists who is a nonresident: an individual "having his or her principal residence outside Georgia at the time of closing," and a corporation, partnership, limited liability company or limited liability partnership "whose principal place of business is located outside Georgia," in each case "unless it otherwise meets the requirements of O.C.G.A. Section 48-7-128(a) and subparagraph (4)(d) of this Revenue Rule to be deemed a resident"; subparagraph (4)(d) is the seller's residence affidavit, for which Form IT-AFF1 is the Department's example. Co-owners are tested separately (rule 560-7-8-.35(2)). Using the authority the statute gives the commissioner to "set a purchase price amount below which no withholding is required" (section 48-7-128(d)), the rule excuses sales with a purchase price under $20,000 and lets a seller whose withholding on the gain would be under $600 avoid withholding with a gain affidavit (rule 560-7-8-.35(3)(b)). The buyer reports on Form G2-RP or a substitute closing statement, and gives the seller a copy to file with the seller's Georgia return for credit (rule 560-7-8-.35(4)(a) to (c)).

The tax withheld is a prepayment: the seller still reports the sale on a Georgia return, which produces a refund or a balance due "the same as with any other income tax return" (Rev. 11/11 guide). The federal analogue, section 1445 withholding under FIRPTA, treats the owner of a disregarded entity, not the entity, as the transferor (Treas. Reg. section 1.1445-2(b)(2)(iii)); Georgia's rules reach a similar result by a different route, through the Department's forms.

The exemptions that turn on the transaction or the seller's type

The statute lists three exemptions: a principal residence of the seller; a mortgagor's conveyance to the mortgagee "in foreclosure or in a transfer in lieu of foreclosure"; and a sale in which the seller or buyer is an agency or authority of the United States or of Georgia, a named federal mortgage entity or "a private mortgage insurance company" (section 48-7-128(d)(1) to (3)). A separate subsection excuses a partnership, S corporation or other unincorporated organization "which certifies to the buyer or transferee that a composite return is being filed on behalf of the nonresident partners, shareholders, or members and that the partnership, Subchapter 'S' corporation, or unincorporated organization remits the tax on the gain on behalf of the nonresident partners, shareholders, or members" (section 48-7-128(e)(1)). A partner who falsely certifies is liable for a penalty of "$500.00 or 10 percent of the amount required to be withheld, whichever is greater" (section 48-7-128(e)(1)).

The Department's Certificate of Exemption, Form IT-AFF3 (Rev. 11/05/21), lists twelve grounds, adding to the statutory ones the $20,000 and $600 rules and four that the statute's text does not list: "The seller is a tax exempt organization and the income from this sale is not subject to federal or state income tax"; "The seller is an insurance company which pays to Georgia a tax on its premium income"; "The transaction is a like kind exchange and the income from this sale is not subject to federal or state income tax"; and, for a seller's taxable years beginning on or after January 1, 2022, that the seller "qualifies for and has made or intends to make the election to be taxed at the entity level as provided by O.C.G.A. Section 48-7-21 or 48-7-23." The partnership election is annual and irrevocable, made "on its timely filed return" (section 48-7-23(b)(2)). The form's composite ground reads differently from the statute: "The seller is subject to withholding under O.C.G.A. Section 48-7-129, and a composite return has been or will be filed on the seller's behalf."

Two features matter in practice. First, the exemptions are tested at the seller: the tax-exempt ground belongs to a seller that is itself exempt, and even then the guide withholds where the sale produces unrelated business taxable income (Rev. 11/11 guide). A partnership with a tax-exempt partner is not an exempt seller. Second, an exemption needs no filing. The rule states that "there are no filing requirements under law in exempt transactions," and IT-AFF3 is an optional form "provided for the convenience of the seller and the protection of the buyer" (rule 560-7-8-.35(5); Form IT-AFF3). A buyer's closing attorney commonly asks for it anyway, because the buyer carries the liability if the exemption does not apply.

The deemed-resident affidavit and its four conditions

The statute provides: "Any seller or transferor who meets all of the following conditions and who provides the buyer or transferee with an affidavit signed under oath swearing or affirming that the following conditions are met will be deemed a resident for purposes of this Code section" (section 48-7-128(a)). The conditions are:

1. "The seller or transferor has filed Georgia income tax returns or appropriate extensions have been received for the two income tax years immediately preceding the year of sale";
2. "The seller or transferor is in business in Georgia and will continue substantially the same business in Georgia after the sale or the seller or transferor has real property remaining in the state at the time of closing of equal or greater value than the withholding tax liability as measured by the 100 percent property tax assessment of such remaining property";
3. "The seller or transferor will report the sale on a Georgia income tax return for the current year and file it by its due date"; and
4. "If the seller or transferor is a corporation or limited partnership, it is registered to do business in Georgia."

The conditions are cumulative. The Department's guide answers the question whether a seller can qualify by meeting some of them: "No. In order to qualify as a deemed resident, all of the qualifying conditions must be satisfied." On timing, where a sale closes before the prior year's return is due, the first condition "will be considered satisfied" if the seller has filed returns or extensions "for the most recent two tax years whose original due dates have passed" (Rev. 11/11 guide). The Department's example affidavit is Form IT-AFF1, Affidavit of Seller's Residence (Rev. 12/11), sworn before a notary. The buyer "is to keep the affidavit and furnish a copy to the Department of Revenue only if requested" (Form IT-AFF1). The buyer's protection is a good-faith standard: "A buyer's reasonable reliance on a seller's affidavit should be sufficient," but "A buyer will be held liable if he had actual or constructive knowledge that the seller's affidavit was false or contained erroneous information" (Rev. 11/11 guide).

The second condition decides most commercial sales. One branch looks forward (a Georgia business that continues after the sale), the other at what remains (Georgia real property at closing worth at least the withholding liability). Neither is satisfied by a history of Georgia returns, which is the first condition's subject, so a seller with an unbroken filing record still fails if it leaves the state with nothing behind.

Who is the seller when title sits in a disregarded LLC

The statute identifies the seller by the closing papers: "The person or entity identified as the seller on the settlement statement shall be considered the seller for all purposes regarding this Code section, including, but not limited to, executing and delivering to the buyer or transferee all forms or other documents incident to determining the appropriate amount of tax to be withheld or the appropriate amount exempt from withholding requirements" (section 48-7-128(b)(3)). Read alone, that sentence makes the LLC named on the settlement statement the seller.

The regulation does not address disregarded entities. It classifies a limited liability company by its own principal place of business (rule 560-7-8-.35(1)(e)) and says nothing about whose filings or business count.

The Department's forms do address it, and they look through. Form IT-AFF1 states: "For purposes of the exemptions, if the seller is a disregarded single member limited liability company (SMLLC), the owner of such SMLLC must meet the requirements," and "If the seller is a disregarded single member limited liability company (SMLLC), both the SMLLC and its owner should be listed as the seller." Forms IT-AFF2, IT-AFF3 and G2-RP carry the same instruction to list both (Form IT-AFF2, Rev. 12/11; Form IT-AFF3, Rev. 11/05/21; Form G2-RP, Rev. 06/01/23).

The texts can be read together. The settlement statement rule governs who acts: the LLC named as seller executes and delivers the affidavits. The forms govern whose facts are sworn: for a disregarded LLC, the owner's residence, filing history, business, remaining property, reporting and registration. That reading is consistent with the statute's purpose, since the owner reports the gain. It is a reading of the forms, not a holding: no regulation, ruling or decision addressing it was found, and the forms are the Department's only published statement on the point.

On that reading, a disregarded LLC seller can rely on its owner, but only for what the owner can truthfully swear. The owner's returns answer the first condition; the owner's registration answers the fourth if the owner is a corporation or limited partnership, and the LLC's own registration does not; and the second condition turns on the owner's Georgia business or remaining Georgia property after the sale.

The single-asset seller: a worked example

A real estate fund organized as a Delaware limited partnership owns, through a wholly owned Delaware LLC disregarded for federal purposes, one Georgia warehouse. The fund's principal place of business is outside Georgia; its partners are a corporation, a tax-exempt trust and several nonresident individuals. The warehouse produces about $400,000 of Georgia rental income a year, and the fund has filed Georgia partnership returns for many years. The property LLC sells the warehouse for $20 million. The adjusted basis is $13 million and selling expenses are $1 million, so the gain is $6 million.

The fund is a nonresident partnership (rule 560-7-8-.35(1)(c)). Withholding at 3 percent of the price would be $600,000; with a gain affidavit on Form IT-AFF2, it is 3 percent of $6 million, or $180,000. The net proceeds cap does not bind unless debt repaid at closing leaves less than the withholding for the seller.

The deemed-resident route fails on the second condition. The fund meets the first through its own Georgia returns, and it can promise the third. If it is registered to do business in Georgia as a foreign limited partnership, it meets the fourth. But after closing it owns nothing in Georgia and conducts no Georgia business: the only business it had in Georgia was owning and leasing the warehouse it has just sold, so it does not "continue substantially the same business in Georgia after the sale," and it has no remaining Georgia real property against which the alternative branch could be measured. Had the fund owned a second Georgia property whose 100 percent property tax assessment was at least the $180,000 or $600,000 liability, the second condition would have been met through the remaining property branch, and the analysis would have turned on registration.

The exemption routes are narrower than they look. The fund is not a tax-exempt seller, even though one of its partners is a tax-exempt trust. The composite route requires a certification that a composite return is being filed "on behalf of the nonresident partners" and that the fund "remits the tax on the gain on behalf of" them (section 48-7-128(e)(1)). Georgia's composite rule lets individuals, corporations, partnerships, limited liability companies, estates and trusts be included (rule 560-7-8-.34(3)(a)), but whether a composite return that leaves some nonresident partners out supports the certification is addressed neither in the statute, the rule nor the Department's guide. The entity-level election on IT-AFF3 is available only if the fund has made or intends to make the partnership election for the year of sale.

Absent one of those, the buyer withholds $180,000 on the strength of the gain affidavit, files Form G2-RP listing both the property LLC and the fund as seller by the end of the month after closing, and gives the seller its copy. The fund attaches the copy to its Georgia return. As a partnership, it passes the credit to its partners "in the same manner as it passes through its income," with a schedule and a copy of the Form G2-RP (Rev. 11/11 guide; Form G2-RP, page 2 allocation schedule).

Real property withholding is not nonresident member withholding

Georgia has a second withholding regime that reaches the same fund. Under O.C.G.A. section 48-7-129(a)(1), a partnership, S corporation or limited liability company "which owns property or does business within this state shall be subject to a withholding tax," computed by "multiplying the nonresident member's share of the taxable income sourced to this state by a rate of 4 percent" (section 48-7-129(a)). The rule restates the 4 percent rate (rule 560-7-8-.34(2)(a)). That regime applies every year to the fund's rental income, with its own exceptions, among them a composite return, a nonresident member's Georgia-sourced share under $1,000 and exceptions in the commissioner's rules (section 48-7-129(e)(1)), and it does not apply to an electing partnership (section 48-7-129(e.1)).

The two regimes differ in every working part: section 48-7-128 falls on the buyer, at 3 percent of the price or gain, credited to the seller; section 48-7-129 falls on the entity, at 4 percent of each nonresident member's Georgia-sourced share, credited to the member. A deemed-resident affidavit or an IT-AFF3 under section 48-7-128 says nothing about the fund's duty under section 48-7-129, and a member's exemption from section 48-7-129 does not relieve the buyer under section 48-7-128.

They meet at one point. Section 48-7-129(e)(2) provides: "Where a nonresident member's share of the taxable income sourced to this state is subject to withholding under other provisions of Georgia law, such amount shall not be subject to withholding under subsection (a) of this Code section." On its text, a partner's share of the gain on which the buyer withheld under section 48-7-128 is not withheld on again by the fund. The rule on member withholding does not mention section 48-7-128 and names Form G2-RP only among the forms sent with Form G-1003 (rule 560-7-8-.34(6)(c), as amended effective June 11, 2026), and neither text says how subsection (e)(2) applies where real property withholding was excused by an affidavit or an exemption. That point is open. Where the buyer did withhold, the subsection's words turn on whether the income "is subject to withholding," not on whether the withholding was computed on the price or on the gain. A fund that avoids withholding at closing through the deemed-resident affidavit or an exemption therefore still faces the separate question of member withholding on the gain for the year of sale.

Practice notes

The analysis starts with the settlement statement and the entity chart: the statute names the seller from the first, and the Department's forms test the owner shown on the second. For a disregarded LLC, the sound sequence is to identify the owner, confirm its residence or principal place of business, and test each deemed-resident condition against the owner's facts, with a document for each: two years of Georgia returns, registration where required, and a continuing Georgia business or a list of remaining Georgia real property with its assessment. A seller leaving Georgia with its only property usually cannot sign the affidavit, and the useful document is then the IT-AFF2 gain affidavit, prepared from basis and depreciation records the seller keeps. The buyer's closing attorney typically asks for the settlement statement, the seller's identification numbers, one of IT-AFF1, IT-AFF2 or IT-AFF3 (or the reason none applies), and the federal non-foreign certificate. After closing, the seller's file holds the Form G2-RP copy and, for a partnership, the allocation schedule that carries the credit to its partners, alongside a separate decision on member withholding under section 48-7-129 for the year of sale. G&G State Tax Group provides pre-closing state withholding analysis for sales of real property held through partnerships and disregarded entities alongside its state and local tax practice.