When someone buys a business, he or she (or it) faces the prospect of becoming liable for any unpaid sales tax liability of the predecessor business. The Wisconsin Statutes provide a procedure to obtain a Sales Tax Clearance Certificate which will limit the successor liability for sales taxes to that amount determined by the Wisconsin Department of Revenue. The procedure requires that a portion of the purchase price be withheld to pay any potential sales tax liability and that certain disclosures be made to the Department. Doing so sets in motion a fixed timeframe in which the Department may make the determination as to the amount of any additional sales tax owed by the seller.
The Sales Tax Clearance Certificate can only be requested or received following the sale of the business. This is because the Department of Revenue is looking for a final end date as to when any sales tax obligations of the seller would cease.
To obtain a Sales Tax Clearance Certificate, the buyer of the business should make a written request for the certificate and provide the following information:
1. The name of the seller
2. The seller’s permit number of the seller
3. The current mailing address of the seller
4. The name of the buyer
5. The seller’s permit number of the buyer
6. The mailing address of the buyer
7. The date of the sale
8. The sale price
Furthermore, it is prudent to include information concerning the amount of the purchase price that has been withheld to cover any additional sales tax due.
Once the request for a Sales Tax Clearance Certificate is made, the Department of Revenue has 90 days to determine whether additional sales tax is due. If the Department does not act within that 90 day time period, the buyer is relieved of any successor liability.
After receiving notice from the Department of Revenue of the amount of sales tax that the seller owed, any amounts that are escrowed may be paid to the Department and the balance to the seller of the business. No further successor liability will arise. Absent a Sales Tax Clearance Certificate, however, no such procedural guaranty will apply to relieve the buyer of a business from potential successor liability.