State and Local Tax Due Diligence: Don't Restructure Without It!
by AccountingWeb on
Is your company considering restructuring its business? Perhaps creating new legal entities or re-aligning its lines of business into different entities? Changing the ownership structure of the legal entities within the commonly controlled affiliated group? Or maybe it is considering acquiring or merging with a new business (unrelated third-party)? Regardless of your company's situation, in each of the above mentioned scenarios, your company must perform its due diligence prior to completing any transaction or restructuring. That due diligence should take into consideration the impact the restructuring or transaction will have on the business operations, legal obligations, insurance, finance, and tax, etc. In regards to the tax implications, there can be significant tax ramifications on the transaction or restructuring itself. In addition to the federal tax impact, the state and local tax impact can be material and varied. Some of the potential state and local taxes to take into consideration are: income tax, gross receipts taxes, franchise taxes, sales and use taxes, property taxes and transfer taxes. Usually the biggest concern in regards to the transaction from a state and local tax perspective are:
- Is there any sales tax on the sale or transfer of assets or change in ownership?
- Is there any transfer tax on the transfer of assets or change in ownership?