Wisconsin Sales Tax Liability Carries Over To New Owner

The State of Wisconsin Tax Appeals Commission has confirmed the liability of a convenience store owner for the previous owner’s sales tax delinquency. Tax Analysts reports that “Successor liability is governed by the Wisconsin Statutes which establish that the purchaser assumes unpaid liabilities of the seller up to the extent of the purchase price.”

Even though the store owner argued that he bought only the assets, the Commission felt it would be difficult to distinguish “the new business from the old,” so the purchaser becomes the successor, and inherits the tax liability of the previous owner/business.

The tax determination amounted to $120,000, and the new owner was aware of this amount prior to completing the sale. However, a clearance from the state was requested prior to completing the sale. That clearance certificate was never issued, and the property was purchased without the tax liability being cleared.

According to the Tax Analysts report, the state law is that a tax debt follows the business or its assets to protect the state’s interest. In addition, it is the purchaser’s responsibility to ensure that the prior owner brings all tax liability up-to-date prior to the purchase finalization. If the tax debt is not cleared prior to sale, the purchaser may retain back the full amount of the tax liability from the purchase price. Whether the purchaser holds back the amount or not, they are liable for the tax due.

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