When the purchaser of a business faces the prospect of successor liability for Wisconsin Sales taxes, he or she (or it) may complain that the business first owing the tax should first be liable for the unpaid debt. This certainly seems like a reasonable complaint that is addressed in the Wisconsin Administrative Code.
The Administrative Code provides that the Department of Revenue should direct its collection efforts against the party that originally owes the tax. Case law has determined, however, that the party that originally owes the tax means the business that charged the sales tax in the first instance. It is this business that is the predecessor. Predecessor does not include any individuals that could have been personally responsible for the payment of the tax under the personal liability provisions of the sales tax statutes. That is, the Department of Revenue does not have to pursue the prior owners, officers or employees of a business that could be or are personally responsible for the predecessor’s taxes. While they must go after the predecessor business before seeking to collect the tax from the successor, the Department is under no obligation to pursue personal liability from the owners of the predecessor before seeking to recover from the successor business.
A practical reality is that the selling business is often no longer in business and therefore has no cash or assets available to pay the tax. Therefore, often the only real resort is ultimately to collect the unpaid sales tax from the successor.