TAMPA - As Florida's coffers shrink in the face of a dour economy, confusion over a tax statute threatens to choke the flow of home sales at a time when the state is struggling under the burden of millions of unsold properties.

The problematic statute mandates how much tax people pay when they sell a house.

In typical transactions, the law is clear about paying taxes on the price of the property, but as lenders agree to more short sales - allowing troubled owners to sell homes for less than the mortgage and writing off the rest - there's disagreement over how much tax to charge.

Some say the tax should be charged on the lower price, a practice that is standard across the state.

Others wonder whether the tax should be based on the amount of the mortgage.

Although the difference may add up to only about $300 on a typical short-sale transaction, multiply that by hundreds of thousands of properties across the state and the impact is substantial.

Millions of dollars in lost tax income are at stake for Florida's financially struggling government.

Also, lenders trying to clear their books of homes in foreclosure face much higher expenses when selling the homes.

Meanwhile, industry players fear a bottleneck created by the confusion could halt short sales, one of the largest categories of homes selling now.

"This is an ugly result," said Burt Bruton, a Miami-based real estate lawyer who teaches real estate tax certification courses for the Florida Bar.

"No matter how you cut it, there's going to be some pain for somebody. It's a mess," Bruton said.

For now, it's up to the Florida Department of Revenue to set the record straight. Bob McKee, deputy executive director for the department, said his office has been asked by some legislators and real estate professionals to interpret how the statute applies to short sales.

That's a tough assignment, he said, because the statute does not specifically address short sales.

"Short sales are so new that they could not have been explained in the statute," he said.

"We need to make sure we have all the information we need, and we have yet to come upon something in our legal research to make a decision," he said.

McKee said his office doesn't want to rush to any conclusion because its ruling will be binding, unless the Legislature decides a new statute is needed.

That's something some real estate professionals vow to push for.

A Stack Of Delayed Closings

Short sales are already stacking up at some area title companies where they have changed how they charge the tax.

Gary Davis, who owns First Affiliated Title Services in New Port Richey, said he has decided to charge the tax, called a documentary stamp, based on the higher amount, not the sales price.

The policy change means all the short sales that were in the works at his office had to be sent back to the lender for approval, delaying the closings.

"My feeling is this is nothing to mess around with," said Davis, who is also a real estate lawyer.

"If we were audited and they found out we didn't charge enough, there could be massive penalties," Davis said.

"And I don't want to have to go back and tell the homeowner they have to pay more," Davis said.

This worries real estate agents and financially troubled homeowners trying to close on short sales, said Greg Armstrong, president of the West Pasco Board of Realtors and a director of the Florida Association of Realtors.

Although some title companies won't close without the higher amount of tax paid, some lenders refuse to pay it until the state says it's owed, he said.

"I have six short sales that were ready to go," he said. "Now they're just sitting on my desk."

That could be a big problem, considering the number of short sales in the pipeline.

This time last year, very few lenders would even consider a short sale.

Now, with foreclosures skyrocketing, lenders had to do something.

There were 14,960 foreclosure filings in the Tampa metro area during the second quarter, up 159 percent from the same period last year.

Late last year, the pace of short sales picked up dramatically, and they're so prevalent now that some real estate agents and title companies specialize in getting short sales approved by lenders.

No one tracks the number of short sales, but nearly 20 percent of the 16,677 homes in the Hillsborough County area that are on the market with real estate agents are listed as short sale offers or preforeclosure properties, said Brad Monroe, a real estate agent and former president of the Greater Tampa Association of Realtors.

"Anecdotally, I could easily see it as being double," he said.

Armstrong estimates that has many as 60 percent of the recent sales in the west Pasco County area were short sales.

Phantom Clerk Spooks Industry

The tax controversy started because of a rumor no one can seem to track down. McKee said industry professionals and legislators say they've heard of at least one Florida clerk of circuit court who has started to charge the documentary stamps based on the higher amount. Officials in Bay area counties say they've always used the sales price.

Bruton said he thinks the statute is worded loosely enough that it could include the debt amount. That's why, he said, the Legislature will likely have to hear the issue and consider the consequences.

"The tax is applied to what the sellers get," he said. "And in a short sale, the seller is getting off the hook for the mortgage shortfall."

In Florida, the seller of a property pays the documentary stamp tax, which is 70 cents for each $100.

Consider the sale of a home in which the seller owes $250,000 on the mortgage. If the sales price in today's market is $200,000, the tax based on that price would be $1,400. Since the shortfall is $50,000, the state could have charged an additional $350.

Although that doesn't sound like a deal-breaker on one loan, lenders with lots of short sales could lose even more money. That's on top of millions they're already losing in failed loans. For the state, it could spell a way to make up for budget shortfalls.

There were an estimated $2 billion in documentary stamp taxes collected during the budget year that ended in July. That was more than half what it was at the peak, in the 2005-06 budget year, said Amy Baker, coordinator of the legislative office of Economic & Demographic Research.

State Sen. Mike Fasano, R-New Port Richey, said he understands the state's budget needs but is concerned about anything hindering a turnaround in the real estate market. Fasano asked for the ruling from the state Department of Revenue two weeks ago.

"These properties are already ready to be foreclosed on," Fasano said. "If these short sales don't happen, I'm worried it could really hurt our market."

Reporter Shannon Behnken can be reached at   (813) 259-7804        or sbehnken@tampatrib.com.