Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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535.0000 SUCCESSOR'S LIABILITY—Regulation 1702

Annotation 535.0003

535.0003 Assumption of Liabilities. A taxpayer entered into an agreement to purchase from A his (1) supplies, (2) inventory, (3) furniture, (4) office equipment, and (5) miscellaneous items. In consideration the taxpayer assumed the following:

(1) A's liability of $6,200 to an awning company.

(2) A's liability of $2,200 on the purchase of an office unit.

(3) A's liability of $1,290 for phone, lights and carpet.

(4) A's flooring on five mobile homes and two furniture packs.

The agreement specifically provided that "this is not a purchase of a business, but consists entirely of a purchase between buyer and seller of merchandise, parts, inventory for proper consideration."

The taxpayer cites the agreement's language and the following factors to support its contention that it was not a successor.

(1) It negotiated a new lease directly with the landlord.

(2) It did not retain the business name, phone number, permits and did not acquire goodwill.

(3) New accounts were opened for utilities.

(4) It moved the old office building and replaced it.

(5) It did not acquire receivables and did not assume warranties on mobile homes sold by A. (6) A retained some mobile homes which were in inventory. These were homes on which deposits were taken but were not sold and delivered by the time of the transfer.

(7) It did not receive an assignment of the dealer reserve account.

(8) It used its own Department of Motor Vehicle license to operate.

(9) It did not use A's signs, marks, logos, etc.

(10) A did not sign a covenant not to compete.

The taxpayer is considered a "purchaser" and a "successor." It could have assumed fewer of A's liabilities and used the funds to pay A's outstanding tax liability. Thus, it had the means to withhold a sufficient amount to pay the tax liability. 12/23/76.