SALT Report 1854 – A New York Court ruled that the purchaser of a sandwich shop acquired in a bulk sale transaction was liable for a New York sales tax assessment that was imposed on the previous owner.
In 2006, the Taxpayer contracted to purchase a sandwich shop in New York. After the closing, the Taxpayer belatedly filed a bulk sales notice with the Department of Taxation and Finance. At that time the Department sent the Taxpayer a notice of claim and a request for documentation that identified the date of the sale. The Department also informed the Taxpayer that all of the seller’s open tax liabilities would be transferred to him as the bulk sale purchaser, and that the seller’s sales tax file showed open liabilities.
At the time the Department sent the notice to the Taxpayer they were in the process of auditing the seller. Upon completion of the audit, the seller’s outstanding tax liabilities were found to be significantly higher than previously estimated. Further, it was determined that the seller was also liable for unpaid taxes at a second store.
The Department notified the Taxpayer of these findings in 2007 and informed him that he was liable for the outstanding tax amounts at both stores. The Taxpayer filed a request for redetermination with the Division of Tax Appeals, arguing that the Department should be estopped from seeking more than the amount it had initially thought to be outstanding.
The Appeals board rejected the Taxpayer’s argument stating that New York Tax Law §1141(c) requires the purchaser in a bulk sale transaction to notify the Division of the sale at least 10 days prior to taking possession of or making payments for the business assets in order to avoid liability for any sales and use tax due from the seller.
In this case, the Taxpayer notified the division of the sale after the transfer of business assets and was therefore liable for any sales and use tax due. Accordingly, the Judge sustained the secondary assessment, and modified the amount of the outstanding tax liability to reflect the higher amount.
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