Anyone who has sold a home can tell you the closing costs for the seller, the most common of which are real estate commission fees, loan settlement fees, title transfer taxes, title insurance premiums and attorney fees.

However, in some states, home sellers may also need to consider whether they are liable for real estate excise taxes.

You may be scratching your head and wondering what this is. So let's explore what exactly a real estate excise tax is and who is responsible for it.

What is a real estate excise tax?

The Real Estate Excise Tax (REET) is a tax on the sale of real estate. This tax has different names, depending on the jurisdiction in which you record the sale.

In some jurisdictions, a real estate excise tax may also be referred to as a real estate transfer tax, transfer fee, recording tax, document transfer tax or deed transfer tax.

While transfer fees vary from state to state, the seller is usually responsible for paying the tax. However, this is subject to change.

"Depending on the jurisdiction, sometimes the buyer is responsible for paying the tax, other times the seller is responsible," says Sarah Sharp, an acquisition attorney and partner at SK&S Law Group and a principal at Acta Consulting LLC, a tax advisory service in Denver." In order to properly plan for transaction costs, buyers and sellers must be aware of their local excise tax rules."

How much is the excise tax?

State and local governments levy excise or transfer taxes on real estate. And the amount is usually based on a percentage of the sales price or the assessed value of the property at the time of sale.

"In most cases, states have a flat transfer tax, but in some states - such as Pennsylvania - the amount of the tax varies from town to town, making the transfer tax extremely specific and somewhat complicated in transactions," says Matthew Ritchie, a home loan specialist with Churchill Mortgage in Rhode Island.

In general, however, real estate transfer tax rates range from 0.01% (Colorado) to 1.5% (Delaware).

In addition, in some states, sellers are subject to state real estate excise taxes and local real estate excise taxes. For example, in Washington State, sellers are subject to a 1.28% state real estate transfer fee and local taxes.

Who pays the excise tax?

Excise taxes are assessed as part of the closing costs of the property and must be paid before the property deed is recorded. Therefore, these costs are only assessed after the sale has officially closed.

While the seller is generally responsible for paying the excise tax on the property at the time of sale, the buyer is ultimately responsible for that tax.

Therefore, if the seller fails to pay the tax, the buyer will be responsible for paying the tax and may end up facing a lien on the newly purchased property.

Are you liable to pay real estate excise tax?

Whether or not you are required to pay real estate excise tax depends entirely on your state and local regulations for the transfer and sale of real estate.

There are currently 14 states that do not levy real estate excise tax or real estate transfer tax - Alaska, Arizona, Idaho, Indiana, Louisiana, Mississippi, Missouri, Montana, New Mexico, North Dakota, Oregon (except Washington County), Texas, Utah and Wyoming.

And, even if you don't live in one of these states, you may not have to pay. Many states that impose a transfer tax also offer exceptions or exemptions that home sellers can apply for.

For example, in Ohio, real estate transfer fees do not apply to

Gifts from one spouse to the other spouse or from children and their spouses

A sale or transfer to or from a non-profit organization is exempt from federal income tax if it is a transfer for no consideration and furthers the charitable or public purposes of the organization.

When selling your home, it is always best to work with a licensed real estate agent or professional mortgage specialist so that you are aware of all the taxes associated with the sale and any exemptions that may apply to you.

What are the taxes used for?

Typically, the government uses the transfer taxes collected in a variety of ways, including to fund rehabilitation projects, open space preservation efforts, housing programs, public transportation initiatives and schools.

In Seattle, the city used REET fees for playground renovations ($200,000) and park and shoreline restoration projects ($600,000).

Proponents of the Real Estate Transfer Tax argue that the assessment is necessary to fund state services, while opponents denounce the transfer tax as an unreasonable tax on the sale of homes.