"Bulk Sale" - Notification Requirements and Exemptions?

In a recent New York State Tax Appeals Tribunal case (Llargo of Lockport, Inc., New York Division of Tax Appeals, Tax Appeals Tribunal, DTA No. 821974, August 23, 2010), the Petitioner, Llargo of Lockport, Inc., and the Division of Taxation each filed an exception to the determination of the Administrative Law Judge issued on July 9, 2009.

Issue
Whether petitioner’s use of property, including tables, chairs, bar stools, and tableware, left behind on the premises of its restaurant, as well as its conduct of business under the same restaurant name as its predecessor, with the same menu and cooking staff, constituted the transfer bulk of business assets under Tax Law § 1141(c) so that petitioner, as the transferee, became liable for sales tax determined due from the predecessor restaurant.Administrative Law Judge Decision

The Administrative Law Judge determined that there was a bulk sale and that petitioner, as purchaser of the business, is responsible for the sales tax obligations of the seller when, as occurred here, timely notice had not been filed (see, Tax Law § 1141[c]).

The Administrative Law Judge determined that the seller received $150,000.00 for transferring her interest in the real property in which the business is located, which was worth $100,000.00, and that $50,000.00 should be attributed to the value of goodwill received by the purchaser and that petitioner’s obligation is limited to the $50,000.00 thus paid to the seller (see, 20 NYCRR 537.4[c]).

The Administrative Law Judge refers to the definition of goodwill as an intangible asset that attaches to a business due to such factors as location, reputation and managerial skill.

New York Tax Appeals Tribunal Decision

The Tribunal affirmed the determination of the Administrative Law Judge. The Tribunal found that the Administrative Law Judge correctly and completely addressed all of the issues raised by the parties.

So What?

If your company or client is involved in any purchase of assets of another business, you need to be aware that some states have "bulk sale notice" requirements (i.e., notice is required to be made to the state of such sale 15 days prior to the date of sale). Compliance with these requirements will protect your company or client. NOTE: Each state will have its own requirements.

On the flip side, several states have "bulk sale" exemptions which would exclude the sale from sales tax. Again, each state is different and may not have an exemption.

Please contact me at brian.strahle@bakertilly.com if your company or client needs assistance in determining its sales tax or bulk sale notification requirements related to any asset purchase. NOTE: This analysis needs to be done prior to the sale becoming final.

This blog

Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States.  He also writes a weekly column in Tax Analysts State Tax Notes entitled, "The SALT Effect."  For more info, visit his website: www.leveragestateandlocaltax.com

You can reach Brian at strahle@leveragesalt.com.

Connect with Brian on LinkedIn. Follow Brian on Twitter. Join the Leverage | SALT LinkedIn Group, connect and contribute with your colleagues!  

Because state and local taxes are deceptively simple and endlessly complicated.

More from this blog

Bloggers crew

Steve Knowles has spent 25 years in business and practice in the UK, but he also worked in the states and the years haven't dulled his way of seeing an alternative view to everyone else, and every day is a new adventure.

42469

Joel M. Ungar, CPA is a lifelong resident of the Detroit area and a graduate of The University of Michigan. He is a principal with Silberstein Ungar, PLLC, a Top 15 auditor of SEC public reporting companies.

74683

Allan Boress, CPA, with over 25 years as a practitioner and consultant to the accounting profession. Mr. Boress is the author of 12 published books in 6 different languages, including a best-seller, The "I-Hate-Selling" Book.

47448

Larry Perry, CPA, CPA Firm Support Services, LLC, is the author of accounting and auditing manuals, author and presenter of live staff training seminars, and author of webcast and self-study CPE programs. He blogs about small audits, reviews, and compilations.

87112
Sandra Wiley, COO and Shareholder, is ranked by Accounting Today as one of the 100 Most Influential People in Accounting as a result of her prominent role as an industry expert on HR and training as well as influence as a management and planning consultant. She is also a founding member of The CPA Consultant's Alliance. Sandra is a certified Kolbe™ trainer who advises firms on building balanced teams, managing employee conflict and hiring staff.
19946

Maria Calabrese, CIR, Human Resources manager for Fazio, Mannuzza, Roche, Tankel, LaPilusa, LLC in Cranford, New Jersey, Maria's topics revolve around the world of: Mentoring, Performance management, and The "Y Generation," a.k.a. "The whY generation".

54563

William Brighenti is a CPA, Certified QuickBooks ProAdvisor, and Certified [Business] Valuation Analyst, operating an accounting, tax, and QuickBooks consulting firm in Hartford, Connecticut, Accountants CPA Hartford.

79226

Ken Garen, CPA, is the co-founder and President of Universal Business Computing Company (www.ubcc.com), a software development firm of high-volume, high-productivity accounting and payroll technology.

24534

Eva Rosenberg, MBA, EA, is the publisher of TaxMama.com, and author of the weekly syndicated Ask TaxMama column. She provides answers to tax questions from taxpayers and tax professionals worldwide.

62964

Amy Vetter, CPA, CITP is the CPA Programs Leader for Intacct Corporation responsible for leading the CPA/BPO Partners nationally.

33916
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
100984
Scott H. Cytron, ABC, is president of Cytron and Company, known for helping companies and organizations improve their bottom line through a hybrid of strategic public relations, communications, marketing programs and top-notch client service. An accredited consultant, Scott works with companies, organizations and individuals in professional services (accounting, finance, medical, legal, engineering), high-tech and B2B/B2C product/service sales.
25200

Rita Keller is a nationally known CPA firm management consultant, speaker, author, mentor and blogger. She has over 30 years hands-on experience in CPA firm management, marketing, technology and administrative operations.

51423
Stacy Kildal is the mom of two fantastic kids, an Advanced Certified QuickBooks ProAdvisor, Certified Enterprise Solutions ProAdvisor, Sleeter Group Certified Consultant, a nationally recognized member of the Intuit Trainer and Writer Network, and co-host of RadioFree QuickBooks.
27026
Michael Alter's blog specializes in providing practical advice to those who seek greater profitability and practice management tactics that enhance deeper client relationships.
31342

Sally Glick, CMO, Principal, Marketer of the Year in 2003 and AAM Hall of Famer in 2007, leads a lively discussion of the constantly expanding roles of marketing and the professional marketers that drive this initiative in accounting firms of all sizes.

98382

The IMA Young Professionals Blog features the insights of IMA’s Young Professionals Committee. Committee members share advice and experiences on careers, continuing education, work/life balance, and other issues affecting young accounting and finance professionals.

32524

FEI Financial Reporting Blog provides highlights from SEC, PCAOB, FASB, IASB, and other regulatory news, including reporting under Sarbanes-Oxley Sect 404. It is written by Edith Orenstein, Director of Technical Policy Analysis at FEI.

109262

Sue Anderson has 30 years of experience in continuing education for accountants. Currently she is the program director for online CPE provider CPE Link.

59674

Jim Fahey is COO of Apple Growth Partners, a regional CPA firm in Ohio. His focus is on the effective and efficient use of technology within the firm by all team members.

38569
Caleb Newquist is the Editor-in-Chief of Sift Media US, overseeing content for both AccountingWEB and Going Concern.
65507

Leita Hart-Fanta, CPA, CGFM, and CGAP is the author of "The Yellow Book Interpreted" and owner of Yellowbook-CPE.com a website devoted to training for governmental auditors.

91342

AccountingWEB is more than just a U.S. team of journalists and financial and technology experts - we have an international side, too! Members of our British team who publish AccountingWEB.co.uk share their ideas, insights, and perspectives from across the pond.

52428