The place to find business sales tax information

— as well as solutions, services and jobs!

Business Acquisitions: Why Sales Tax Due Diligence is a MUST.

author photo of Silvia Aguirre

It always surprises me when new owners of an establish business are dismayed to receive a tax bill that they assume is the responsibility of the previous owner.  Sales taxes are based on the business and not who owns it at the time.  In a bulk purchase, you are acquiring the tax liability that comes with the business, even if that tax liability does not rear its ugly head until years later.

It suffices to say that if you are looking to buy a business, and it does not matter if it’s a multi-million dollar business or worth thousands, you need to do your due diligence when it comes to sales taxes.  For some reason, these taxes always fly under the radar. This is particularly true in the areas of sales tax exemption certificates and compliance. You need to add this important piece to your check list. Not only do you need to maintain all the information for exempt sales under the previous owner to prove that were legitimate exemptions, but you also need to make sure they are considered valid. What would be the use of having an invalid certificate a few years down the road when the auditor comes knocking? Of course, you can always reach out to the customer to ask for a new certificate, but you might be out of luck in collecting one.  Then it will be up to you to explain why and how it happened.

When you decide to acquire a business and want confirmation that it is clear of sales tax liability, you can contact the state and ask for what you might refer to as a “No Sales Tax Liability Declaration.” It has several different names depending on the state, but you get the idea. It sounds easy, but it may take a while to obtain. That piece of paper still might not be enough, because there are other reasons to be audited and liabilities that could be found, but at least it may give you a little piece of mind.

Note: Silvia Aguirre is no longer accepting new comments nor questions. More recent "Exemption Certificate Mgmt" posts by Michael Fleming (of Peisner Johnson) are still active. Also use the Site's SEARCH bar to locate other helpful information.

Other recent “Exemption Certificate Mgmt.” posts by Silvia Aguirre:

NOTE: All blog content, comments, and participation subject to disclaimer at bottom of page.

Comments

Note: Silvia Aguirre is no longer accepting new comments or questions.  More recent "Exemption Certificate Mgmt" posts by Michael Fleming (of Peisner Johnson) are still active.  Also use the Site's SEARCH bar to locate other helpful information.

Disclaimer:

Access to any portion of SalesTaxSupport.com is contingent upon your acceptance of our Terms of Use. This Web Site and content provided by STS Publishing, LLC and its third party content providers, including, but not limited to information, documents, forms, comments, advice and opinions, is for informational purposes only, and is not a substitute for professional advice, nor does the use of this Web Site constitute a professional-client relationship. The Web-Site also includes advertisements, directory listings, job postings and links to third party web sites, all of which are provided for your convenience only and in no way constitute a referral, endorsement, or warranty by SalesTaxSupport.com of any product or service provided by such third parties. All content is provided “as is” with no guarantee regarding accuracy, suitability, or timeliness. Your reliance on any content accessed on or through the Web Site, or on any product or service provider is strictly at your own risk.