Buying, Selling, or Discontinuing a Business
Whenever you buy, sell, or discontinue a business, you will need to contact the Board. If you are buying a business, you may need to obtain a seller's permit, as permits are not transferable. If you are selling or discontinuing a business, you will need to close out your account. (If the business in question is a corporation or limited liability company, please read items 8 and 9 in addition to the other items below.)
- Do I need to contact the Board if I am buying a business?
- What information do I need to include in my written request for a tax clearance?
- Am I required to set money aside to cover unpaid taxes owed by the previous owner?
- Do I need to apply for a new seller's permit if I buy another business?
- Do I need to tell the Board I am closing or selling my business?
- If I withdraw from a partnership, do I need to notify the Board?
- If I withdraw from a business, leaving my spouse as sole owner, should I notify the Board?
- Will I personally be required to pay taxes owed by a corporation or limited liability company?
- Am I liable for the entire amount of unpaid tax owed by a corporation or a limited liability company?
Yes. To protect yourself from having to pay any sales and use tax owed by the business you are buying, you should write to the Board and request a certificate of tax clearance. If you do not obtain a clearance before you buy the business, and if taxes are owed and the previous owner has failed to pay those taxes, you could be required to pay any taxes, interest, and penalties that are due.
After receiving your written request for a clearance, the Board will determine whether the business you are buying owes any sales and use taxes, interest, or penalties. If any money is owed, the current owner will be notified and advised to pay the amount due or you will be advised of an amount to withhold from the purchase price to cover the potential liability. This amount must be paid to the Board before a certificate of tax clearance is issued.
If the business you are buying has more than one location and you are buying one or more locations (but not all), you should request a clearance for each location. If the business you are buying has more than one location and you are buying all the locations, only one clearance is needed.
If you are buying a business through an escrow company, you should ensure that the company requests the certificate of clearance on your behalf. It is important to remember that if taxes are owed by the current owner and escrow closes without a certificate of tax clearance, you may be held liable for unpaid taxes (for the amount up to the purchase price for the business, which includes any assumption of indebtedness).
- The name, address, and phone number of the purchaser.
- The name, address, and phone number of the seller.
- The business address.
- A copy of the Bill of Sale or purchase agreement with the amount of purchase price.
- The name of the escrow company and escrow number, if applicable.
- The date the business was purchased
Yes. If the Board does not issue the certificate of tax clearance described in #1, you are required to withhold enough of the purchase price of the business to cover any amount owed to the Board until the former owner produces:
- A receipt from the Board showing all the liability has been paid, or
- A certificate from the Board stating that no amount is due
If the Board has provided you with a certificate of tax clearance for the business, you are no longer legally required to set aside funds to cover unpaid sales and use taxes.
Yes. A new permit would be required to show you as the correct owner. You will need to provide the same information required of all seller's permit applicants. See Obtaining a Seller's Permit .
Yes. You must let us know in writing of your intention to close or sell your business. You may satisfy this requirement by providing the information requested on Form BOE-65, Notice of Close-Out, and returning the completed form, your permit and other required documentation to the office that handles your account. The Board will close out your account and cancel your seller's permit.
If you made a cash or interest-bearing security deposit to the Board when you obtained your seller's permit, the entire deposit or any unused portion will be returned to you depending on whether any taxes remain to be paid.
If you do not notify the Board when you sell your business or stock of goods, you may be liable for taxes, interest, and penalties incurred by the purchaser or successor.
REMINDER: It is a misdemeanor to use your seller's permit if you are no longer actively engaged in business. For more information, please see Publication 74, Closing Out Your Seller's Permit.
Yes. You should notify the Board whenever a partner is added or dropped. Timely notification to the Board could help limit the personal liability of partners for taxes, penalties, and interest charges that are incurred after the partnership change. You should let us know of the change in writing. Publishing this information in a newspaper or notifying another state agency is not sufficient notice to the Board.
If your name is on the seller's permit with your spouse and you withdraw from ownership of the business, you should let us know of the change in writing. A legal separation or divorce decree awarding the business to one spouse, without written notification to the Board, is not sufficient notice.
The following information applies to corporations and limited liability companies:
Yes. If a corporation or limited company is dissolved, terminated, or abandoned, you may be held liable for any unpaid taxes, interest and penalties if:
- You controlled or supervised the filing of returns or payment of tax or were responsible for filing returns or paying tax; or
- You were under a duty to act for the corporation or limited liability company in complying with the Sales and Use Tax Law and
- You willfully failed to pay any tax due from the corporation or limited liability company or caused the tax not to be paid.
Not necessarily. You are liable only for taxes, interest, and penalties owed for the period of time for which you were responsible for the filing of returns or for compliance with the Sales and Use Tax Law.