Sales and Use Tax Buying a Business - Successor's Liability

  1. What is meant by successor liability?

  2. If I buy an existing business will I be liable for any unpaid sales and use taxes of the seller for that business?

  3. If I buy most of the assets of a business (e.g., equipment, furniture, inventory), but not the entire business, could I be held personally liable for the unpaid taxes of that business?

  4. How do I know how much to withhold?

  5. If I buy an existing business will I need a new seller's permit?


  1. What is meant by successor liability?

    The purchaser of a business or a stock of goods (including furniture, fixtures, equipment, inventory, leases, licenses, and good will) of any retailer liable for sales or use tax is personally liable for the payment of the seller's sales or use tax if the purchaser fails to withhold a sufficient amount of the purchase price to cover the taxes due.

  2. If I buy an existing business will I be liable for any unpaid sales and use taxes of the seller for that business?

    Yes. The purchaser of a business (the successor) is liable for any unpaid sales and use taxes of the seller for that business. The purchaser should withhold a sufficient amount from the purchase price to cover any unpaid sales and use taxes of the seller. After the sale has taken place, the purchaser may request a "Sales and Use Tax Clearance Certificate" indicating that all Wisconsin sales and use tax liabilities of the seller for that business are satisfied.

  3. If I buy most of the assets of a business (e.g., equipment, furniture, inventory), but not the entire business, could I be held personally liable for the unpaid taxes of that business?

    Yes. The purchaser of a stock of goods (including furniture, fixtures, equipment, etc.) from a business (the successor) may be liable for any unpaid sales and use taxes for that business. The purchaser should withhold a sufficient amount from the purchase price to cover any unpaid sales and use taxes of the seller and immediately upon completion of the sale, request a clearance certificate from the department.

  4. How do I know how much to withhold?

    Wisconsin law prohibits the department from sharing delinquent tax information of others with the purchaser of a business or stock of goods prior to the purchase. However, there are other sources of information that will give the purchaser an indication that there are unpaid sales and use taxes prior to making a purchase so that all or a portion of the purchase price can be withheld pending obtaining a clearance certificate. The purchaser can:

    1. Require as part of a purchase agreement that the seller obtain from the department and provide to the purchaser, a summary of the seller's unfiled sales and use tax returns and unpaid taxes.

    2. Check the Wisconsin Delinquent Taxpayers list.*

    3. Check the Circuit Court Access for delinquent tax warrant filings and satisfactions.*

    *These lists in b and c are not all inclusive. A business may have unpaid sales and taxes and not be on the Wisconsin Delinquent Taxpayers list because its debt is less than $5,000, it is paying its unpaid taxes through an approved payment plan, it has submitted a Petition for Compromise under consideration, or it is in a bankruptcy proceeding. A business may not have warrants filed against it for unpaid taxes for a number of reasons.

  5. If I buy an existing business will I need a new seller's permit?

    Yes, a seller's permit is required for every individual, partnership, corporation or other organization making taxable sales, or providing taxable services in Wisconsin, unless all sales by the seller are exempt from sales and use tax. A seller's permit cannot be transferred; therefore, you must apply for a new seller's permit. You can register online or use Form BTR-101.

    For additional information about which sales and services are taxable, see What Is Taxable.

    For additional information see Sales and Use Tax Permits.

FOR MORE INFORMATION PLEASE CONTACT:

MS 5-77
WISCONSIN DEPARTMENT OF REVENUE
Customer Service Bureau
PO Box 8949
Madison, WI 53708-8949
Phone: (608) 266-2776
Fax: (608) 267-1030
Email additional questions to DORSalesandUse@wisconsin.gov

March 6. 2018