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Sales & Use Tax Tips for SEPTEMBER 2007
Mergers & Acquisitions - Limited Successor Liability for Buyers; A Fair Price for Sellers.
Purchase contracts alone can be insufficient to protect against successor liability, leaving the purchaser with tax assessments that can reach millions of dollars.
Buyers and sellers both face the potentially costly risks of unknown tax liabilities affecting the transaction. The buyer faces the risk of inheriting the liability as successor liability. The seller faces the risk that the buyer's due
diligence team will be ultra-conservative in protecting the buyer. They will likely determine potential liabilities more aggressively than state auditors would, putting the seller at a greater disadvantage on price and/or escrow amount required in a seller indemnification agreement.
A Due Diligence review should be performed to identify hidden liabilities. Various states also require Bulk Sale or
similar notifications to statutorily relieve the buyer from inheriting the seller's liabilities. Upon notification, states often audit the seller.
With a plan in place, sellers are better prepared to negotiate a fair price and acceptable terms. Sales tax professionals can help seller's identify and resolve, or put a plan in place to resolve, their Sales & Use Tax exposure. This
can eliminate the buyer's concerns and potential liability.
Some common mistakes buyers and sellers make in mergers and acquisitions can plague even those who thought they were well protected. IRS code and
taxability factors are often considered during an asset purchase, a stock transfer, or contribution of assets. This can lead to unexpected consequences concerning potential Sales or Use Tax liabilities.
In most, states sales tax liabilities can be transferred in an asset sale. Problems can arise when there are assets in multiple states. Not all states exempt casual sales of business assets from Sales & Use Tax. The company's home
state's laws on Casual Sale exemptions or taxability are often incorrectly assumed to be standard. Also, structuring transactions as "Tax Free" for IRS purposes can impact certain Sales & Use Tax exemptions.
Let Olivier & Associates' sales tax professionals identify and evaluate your best options before the transaction takes place. Our expertise and experience in this area on behalf of our clients is consistent and impressive. Olivier
& Associates has frequently been asked to provide a second opinion and assistance in renegotiating the terms of a merger or acquisition agreement.
For more information visit our Mergers and Acquisitions webpage.
* This tip is intended to provide general information only and is not to be considered as a substitute for professional advice.
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Should you have questions or require assistance please Contact us today or call 1-888-466-2829 to speak with an Olivier &
Associates Sales and Use Tax professional for a no-obligation consultation about your Sales & Use Tax issues.
