Kentucky – Successor’s Sales Tax Liabilities

SALT Report 1599 – The Kentucky Department of Revenue issued guidance regarding the implications of “successor’s liability.”  KRS 139.670 and KRS 139.680 states that an individual or corporation that purchases an existing retail business may be liable for sales and use tax due to the state, even though the tax liability is a result of transactions that occurred prior to the successor’s purchase of the business.
Successor’s liability will be imposed on the purchaser if the following four conditions are met:
  • There is unpaid sales and use tax
  • The seller is a retailer and has sold out or otherwise quit the business
  • The purchaser gave the seller consideration in the form of money, property, assumption of liabilities, forgiveness of debt or any other valuable consideration, and
  • The purchaser failed to withhold and remit a sufficient amount of purchase price to pay sales tax on the sale of the business, as well as any outstanding sales and use tax liabilities, plus applicable penalties and interest, incurred by the predecessor or any former owner

Successor’s liability will not apply to business transfers that are the result of an assignment for the benefit of creditors, foreclosures, or sales by trustees in bankruptcy.

Prospective buyers are urged to request a certificate of tax clearance from the Kentucky Department of Revenue to verify a business’s tax liabilities prior to purchase.

For Further Information:

Kentucky Department of Revenue – Sales Tax Facts