A Tasmanian family has had their house sold by the local council for $120,000 after they refused to pay about $3,000 in rates over seven years on religious grounds.

The Beerepoot family did not pay because they believed it was God's land, not council's.

"You are asking us to bow down to a false God which is something we cannot do," a letter submitted to the council from the family read.

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The family previously told the council the land belonged to the "Heavenly Father", and rates payment was a matter "between council and God".

After a debt of $9,332 accrued on three properties owned by the Beerepoots, the Meander Valley Council engaged a realtor to sell the Mole Creek residence in the state's north west.

A motion was passed at a council meeting in March to sell all three properties, unless the rates were paid by June.

An "anonymous source" paid the rates for two properties in Chudleigh which make up the Melita Honey Farm shop earlier this year but the rates on the Beerepoot's Mole Creek home remained unpaid.

Meander Valley Mayor Craig Perkins said someone had paid the money anonymously because they recognised how important the Chudleigh honey store was to the local community.

The auction for the property, which sits on 2.44 hectares, was held at the council chambers in Westbury and bidding started at $20,000.

Cr Perkins said the new owners got a bargain.

"I suspect low 300s would have been a good price to pay for it," he said.

"They've picked up a property in a lovely part of Tasmania, I suspect, at significantly less than market value."

Under the Local Government Act, any excess from the sale will go back to the property owners.