A transfer tax is a tax on the passing of title to property from one person (or entity) to another.
In a narrow legal sense, a transfer tax is essentially a transaction fee imposed on the transfer of title to property. This kind of tax is typically imposed where there is a legal requirement for registration of the transfer, such as transfers of real estate, shares, or bond. Examples of such taxes include some forms of stamp duty, real estate transfer tax, and levies for the formal registration of a transfer. In some jurisdictions, transfers of certain forms of property require confirmation by a notary. While notarial fees may add to the cost of the transaction, they are not a transfer tax in the strict sense of the term.
In the United States, the term transfer tax also refers to Estate tax and Gift tax. Both these taxes levy a charge on the transfer of property from a person (or that person's estate) to another without consideration. In 1900, the United States Supreme Court in the case of Knowlton v. Moore, 178 U.S. 41 (1900), confirmed that the estate tax was a tax on the transfer of property as a result of a death and not a tax on the property itself. The taxpayer argued that the estate tax was a direct tax and that, since it had not been apportioned among the states according to population, it was unconstitutional. The Court ruled that the estate tax, as a transfer tax (and not a tax on property by reason of its ownership) was an indirect tax. In the wake of Knowlton the Internal Revenue Code of the United States continues to refer to the Estate tax and the related Gift tax as "Transfer taxes."
In this broader sense, estate tax, gift tax, capital gains tax, sales tax on goods (not services), and certain use taxes are all transfer taxes because they involve a tax on the transfer of title.
Famous quotes containing the words transfer and/or tax:
“No sociologist ... should think himself too good, even in his old age, to make tens of thousands of quite trivial computations in his head and perhaps for months at a time. One cannot with impunity try to transfer this task entirely to mechanical assistants if one wishes to figure something, even though the final result is often small indeed.”
—Max Weber (1864–1920)
“But the tax collector, standing far off, would not even look up to heaven, but was beating his breast and saying, ‘God, be merciful to me, a sinner!’”
—Bible: New Testament, Luke 18:13.