New state sales tax on home title searches

Starting Wednesday, sales tax will be charged on title insurance searches in home purchases and refinancings under a new state tax regulation.

But consumers are not expected to feel a big pinch at closing under the two-tier taxing system set up by the New York State Tax Department.

First, borrowers will be directly charged the sales tax only on municipal information searches that they or the lender require, such as for code violations on the properties or whether the municipality or a homeowners association is responsible for street upkeep. With searches costing several hundred dollars per borrower, the tax would likely fall in the $25 range.

"I think it's unfortunate for the consumer, because they end up paying more for the same product," said Barbara Prignano, owner of Magnolia Abstract Services, a title insurer in East Islip.

Title insurance companies will be charged the sales tax when they pay for deed and lien searches and other information required to issue a policy.

This past week, the state insurance regulators rejected a request from the New York State Land Title Association to allow firms to pass this cost on to consumers. In the average deal the sales tax might come up to $40, title insurance firms said.

"If you do 20 a week, it does add up," said Richard Novak, co-owner of Junction Abstract in Brooklyn, which does about half of its business on Long Island.

Susan Burns, spokeswoman for the New York State Tax Department, said efforts to tax information services have been in the works for the last few years.

She could not immediately answer other questions, but a department memo in July on taxable information services included genealogical research, investment reports, college selection services and sports data reports.

Anthony Maiocchi, president of the New York State Land Title Association, questioned some of the new sales tax regulations. For example, the tax rate charged will depend on the closing location, not the property location. So a Suffolk home closed in New York City will be charged the higher 8.875 percent rate rather than Suffolk's 8.625.