When Sales Tax Is An Unpleasant Surprise
Surprises can be great…birthday parties, winning lotto, finding money in a pocket, etc. Other surprises, such as getting a letter from New York State, that you owe sales tax and use tax from a company that you bought? This is an unfortunate surprise that many companies face.
Purchasing a business can be very exciting, but also expensive. Most businesses are unaware that sales and use tax responsibilities do not disappear with the transfer of ownership. Many jokes have been made that some things in life are inevitable, with taxes being one of them. Few businesses dive deeper to see if there have been any outstanding assessments for sales and use taxes. Or check to see if there were errors in calculating the sales and use tax that was due. When a purchaser buys a business, any sales and use tax liabilities get transferred from the old business to the new business.
What can you do before the sale?
There are several things we can do before the sale. The first thing is conducting a due diligence review. This will disclose any sales and use tax issues, even if they haven’t yet been discovered by the government.
We can also assist with the “Bulk Sale Filing” requirement, which is required in many states. With a Bulk Sale Filing, the state is required to get back to the purchaser with any sales and use tax liability that exists on the business. If there is no liability, a tax clearance letter will be issued. The new business will be held harmless for any sales and use tax liabilities that may arise from the old business.
What can you do when you find out additional sales and use tax may be due?
What happens when we find that additional sales and use tax may be due? One option is to file for a Voluntary Disclosure Agreement. Under the agreement, the taxpayer pays back any sales and use tax due. However, there is a limited “look-back” period and penalties are waived. And psst…in many states we may be able to do this anonymously. If you do not like the state’s offer, you can walk away from it. Some states offer additional benefits such as a promise of no criminal prosecution.
Avoid any unpleasant surprises and use a specialist. Call Sales Tax Defense, and we can help! We can help protect you and avoid any costly discoveries.
Last year a company came to us to and asked whether its’ sales were taxable in the 12 states that it does business. And they wanted to if they had economic nexus in those 12 states. We gave the company taxability advice. It was recommended that it register and file sales tax returns in all states that it had nexus, whether or not its sales were taxable in those states. We proceeded with registering the company for sales tax purposes in multiple states.
When the company expands into another state, we provide taxability guidance. If the company is unsure how to file a sales tax return, we provide instruction. Once the company requests that we review filed returns to ensure all numbers are reported correctly and payment was properly submitted, we provide help.
Sales Tax Defense is happy to give ongoing sales and use tax advice and guidance!