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New York Business Owners: File Promptly or Face Tax Penalties

  • Oct 29, 2012 | Gail Cole

If you buy a company in New York, be warned: New York Tax law specifies that if you're late filing the notice of sale to the the New York State Department of Taxation you might have to pay open tax liabilities carried by the prior business owner.  

Parvinder Singh Salh of New York purchased a sandwich shop and all its inventory through a bulk sale. Unfortunately, due to his  failure to notify the Department of Taxation of the sale within 10 days, he also acquired the previous owner's open tax liabilities. Applicable tax law notes that:

"Whenever a person required to collect tax shall make a sale, transfer, or assignment in bulk of any part or the whole of his business, assets, otherwise than in the ordinary course of business, the purchaser… shall at least ten days before taking possession of the subject of said sale… notify the tax commission by registered mail of the proposed sale and of the price, terms and conditions thereof whether or not the seller… has … informed the purchaser… that he owes any tax pursuant to this article, and whether or not the purchaser … has knowledge that such taxes are owing, and whether any such taxes are in fact owing." (Emphasis mine, New York Tax Law § 1141 (c)).

Mr. Salh admits that "he did not comply with this statutory requirement." When he did belatedly file the bulk sale with the Department of Taxation, the Department identified the seller as Worldwide Trading, Inc, informed Mr. Salh "that all of Worldwide's open tax liabilities could be transferred to him as a bulk sale purchaser," and advised "that Worldwide's sales tax file showed open liabilities."

New York Tax Law § 1141 (c) reads that:

"For failure to comply with the provisions of this subdivision the purchaser … shall be personally liable for the payment to the state of any such taxes theretofore or thereafter determined to be due to the state from the seller… ."

Regrettably for Mr. Salh, Worldwide's sales tax liabilities proved to be quite extensive. He did not create those debts, but in failing to notify the Department of Taxation of the bulk sale in a timely manner, he is now liable for them.

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.