Beginning Jan. 1, 2024, when a business owner sells more than 50% of their business’s tangible personal property to another person (a successor), the successor will be liable for the seller’s past due sales, use, county innkeeper’s, and food and beverage tax.
Although the effective date to apply successor liability to bulk sale transactions is Jan. 1, 2024, legislation limits the application to transactions that take place on or after Feb. 14, 2024. DOR will reject any submissions for transactions with a closing date prior to Feb. 14, 2024. Any submissions made before Jan. 1, 2024, will be considered to have been submitted on Jan. 1, 2024, to calculate for the 20 days allowed for a response.
See Notice of Transfer in Bulk form instructions
Successor in Liability FAQ
- What is meant by a successor in liability?
When a business owner transfers more than 50% of the tangible personal property of a business to another person, the purchaser/transferee may be liable for the seller's/transferor’s past due sales, use, county innkeeper’s, or food and beverage tax.
A Notice of Transfer in Bulk must be filed with DOR at least 45 days prior to the transfer or sale of tangible personal property of the business.
- As a successor in liability, what do I have to pay?
A successor in liability is responsible for any sales, use, food and beverage, or county innkeeper’s tax due, including penalties and interest, of the transferring business up to the amount of the purchase price or value of the tangible personal property transferred.
- If I buy an existing business, will I be liable for any unpaid sales and use taxes of the seller/transferee for that business?
Yes. A purchaser/transferee of a business may be liable for any unpaid sales, use, food and beverage, or county innkeeper’s tax owed by the seller/transferor, including penalties and interest, up to the amount of the purchase price or value of the tangible personal property transferred.
- If I buy most of the assets of a business (e.g., equipment, furniture, inventory), but not the entire business, could I be liable for the unpaid taxes of that business?
Yes. The purchaser/transferee of a stock of goods (including furniture, fixtures, equipment, etc.) from a business may be liable for sales, use, food and beverage, or county innkeeper’s tax owed by the seller/transferor.
- I am in the process of purchasing a business. Can DOR provide me the seller’s relevant tax information so I know how much to withhold from the sales price to cover the liabilities?
Yes. If a completed Notice of Transfer in Bulk is filed with DOR, DOR can provide:
- A summary of sales, use, food and beverage and county innkeepers tax liabilities, including missing and/or estimated periods; or
A tax clearance letter if no outstanding tax liabilities or past due returns are found.The notice must also include a copy of a purchase agreement signed by both the seller and purchaser.
Note: The seller must acknowledge and approve the release of their tax information.
- What is a tax clearance letter?
If the seller has no outstanding tax liabilities or past due returns, a tax clearance letter will be mailed to the purchaser/transferee and seller/transferor within 20 days after receipt of the Notice of Transfer in Bulk. A tax clearance letter is valid for 60 days.
- How long will it take to receive the tax clearance letter once the request has been submitted?
A tax clearance letter will be mailed within 20 days after receipt of a completed Notice of Transfer in Bulk along with all required documents.
- Who will receive a copy of the clearance certificate when it is issued?
The seller/transferor and purchaser/transferee will both receive a tax clearance letter.
- I haven’t sold my business yet, but I would like a statement stating that all of my state taxes are paid. Can I still get a tax clearance letter?
No. DOR will not respond if there is not an identifiable transaction with a closing date due to the timing requirements of the statute.
- If I am assuming ownership of a business and there is no purchase price, can I be a successor in liability?
Yes. Transfer of more than 50% of the tangible personal property can result in the purchaser/transferee becoming a successor in liability even if the seller/transferor does not receive any consideration. This includes gifts or transfers by other legal means.
- The seller/transferor of a business has several locations. I have purchased only one location. Can I be responsible for what is owed at all locations?
Yes. A successor in liability is responsible for the applicable taxes owed by the legal entity transferring the tangible personal property. The test for determining whether a purchaser/transferee is a successor in liability is measured by the amount of tangible personal property owned by the legal entity regardless of location.
- Can I be a successor in liability if the sales contract requires the seller to pay all liabilities?
Yes. Successor in liability is determined by law and shall not be altered by agreements and contracts between a buyer and seller.
- If I buy an existing business, will I need a new retail merchant’s certificate?
Yes, unless the purchaser/transferee is already registered and will be utilizing the acquired tangible personal property at a registered location. A retail merchant’s certificate is required for every individual, partnership, corporation or other organization making taxable sales or providing taxable services in Indiana. A retail merchant’s certificate cannot be transferred; therefore, you must apply for a new retail merchant’s certificate.
You can register online using our e-services portal at intime.dor.in.gov or visit online-business-tax-application-bt-1-checklist for more information on how to register a new business.
Contact us:
Questions on successor in liability? Call Business Tax at 317-232-0129 or mail to Indiana Department of Revenue, PO Box 7206, Indianapolis IN 46241-7206.