Tax Clearance Basics

seller's taxes are a punch in the face

When you buy a business, you should make sure that the seller is caught up on paying state taxes. If you don’t, you might find yourself stuck with the bill after closing. Worse yet, you might find that your shiny new business is encumbered by a tax lien.

In every state I’m aware of, the law allows state taxing authorities to assess the buyer of a business for unpaid taxes of the seller — even if the transaction is structured as an asset sale. Tax obligations follow the business assets, even if the purchase agreement says that the buyer isn’t taking on those liabilities.

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