What is Transfer Tax?

Legal Definition
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.

The United States had a tax on sales or transfers of stock from 1914 to 1966. This was instituted in The Revenue Act of 1914 (Act of Oct. 22, 1914 (ch. 331, 38 Stat. 745)), in the amount of 0.2% (20 basis points, bips). This was doubled to 0.4% (40 bips) in 1932, in the context of the Great Depression, then eliminated in 1966.
-- Wikipedia
Legal Definition
A tax upon transfers of property by will or inheritance; a tax upon the passing of the title to property or a valuable interest therein out of or from the estate of a decedent, by inheritance, devise, or bequest. See In re Hoffman's Estate, 143 N. Y. 327, 38 N. E. 311; In re Gould's Estate, 156 N. Y. 423, 51 N. E. 287; In re Brez's Estate, 172 N. Y. 609, 64 N. E. 958. Sometimes also applied to a tax on the transfer of property, particularly of an incorporeal nature, such as bonds or shares of stock, between living persons.
-- Black's Law Dictionary