Buying business assets requires notifying the appropriate government agencies of the upcoming sale. Failing to do so could have serious consequences that can delay opening the newly-acquired business or bring personal financial liability to the buyer. For most business transfers, there are three steps that the buyer must take before closing, and, like all things complicated, involve taxes. These steps are outlined below with excerpts directly from the relative state forms and instructions.
1. File the Bulk Sales Notice
A person who is the purchaser of all or any portion of another’s business assets, otherwise than in the ordinary course of business, must, at least ten days before taking possession of such assets, or paying for them, whichever comes first, mail a Notification of Sale, Transfer or Assignment in Bulk, form AU- 196.10, to the Department of Taxation and Finance by United States registered mail or United States certified mail – return receipt requested, with the sender’s receipt postmarked by an employee of the United States Postal Service. Failure to file a proper and timely Notification of Sale, Transfer, or Assignment in Bulk by the purchaser, or failure to withhold sufficient consideration when the purchaser has been timely notified by the Tax Commission, will result in personal liability of the purchaser for taxes due from the seller, limited to the purchase price or the fair market value of the business assets sold, whichever is higher.
2. Register for your own new sales tax number (Certificate of Authority to Collect Sales Tax).
The purchaser, if his business will be required to collect any sales or compensating use tax, or will sell tangible personal property for resale, must apply for the Certificate of Authority at least twenty days prior to commencing or opening such place of business, or before purchasing or paying for business assets, whichever comes first, file a Certificate of Registration, form TP-153, with the Tax Department. Form TP-153 may be obtained from the Taxpayer Assistance Bureau, Department of Taxation and Finance, State Campus, Albany, New York 12227.
3. Remit sales tax to the state for the taxable portion of the sale (tangible personal property).
If a portion of the purchase price is for sued machinery or equipment, sales and use tax may be owed for this portion of the sale. (For manufacturers, there may be an exemption available with a ST-121 form for machinery and equipment used to make a tangible product.) In most cases, the rate will be the sales tax rate applicable in the county where the buyer is located. This is reported with an ST-131 form for casual sales. The form and tax must be filed within 20 days.
Understanding your requirements and taking the appropriate steps will increases the likelihood that your business transfer closes smoothly and allows you the opportunity to get on with your new business venture.