CS-Responsible Parties-4 - How to Avoid Owing Taxes as a Successor Prior to Purchasing a Business

Under Tennessee law, the purchaser of a business or stock of goods must withhold a sufficient amount of the purchase price to cover the seller’s unpaid taxes. If the purchaser fails to do so, the purchaser could become liable for the business’ unpaid taxes.

A purchaser can limit its liability by seeking one of the following from the seller and, in the case of an affidavit, submitting it to the Department of Revenue for verification:

A. a certificate from the Department of Revenue stating that no applicable taxes are due;

B. a receipt from the Department of Revenue showing that all taxes due have been paid, or

C. an affidavit from the seller stating under oath that no tax, penalty, or interest is due; or detailing what applicable taxes are due (a sample Tax Affidavit is available for download below).

  • For a Tax Affidavit to be valid, the purchaser must submit a copy to the Department of Revenue’s Collection Services (formerly Tax Enforcement) Division by registered or certified mail, or by personal service to the Department of Revenue using the mailing address below:

    Tennessee Department of Revenue
    ATTN: Collection Services, Special Procedures Unit
    P.O. Box 190655 Nashville, TN 37219-0665

  • The Department has 15 days to notify the purchaser if the affidavit is incorrect.
  • Affidavits must also be done in good faith, and purchasers should be prepared to provide documentation showing that the appropriate funds were withheld from the purchase amount.
  • If the Department does not respond timely to a valid affidavit, or if the Department confirms the amount(s) in the affidavit, any successor assessment must be limited to the tax debt identified in the affidavit.

If you have questions about this process, the Department's Special Procedures Unit can also be reached at the following:

Phone: (615) 741-7074

Email: special.procedures@tn.gov

Please Note: The specific authorities discussed here are found in three similar code sections, one for each specific tax type (e.g. sales/use) for which a purchaser may be held responsible: Tenn. Code Ann. § 67-6-513 (sales tax), § 67-4-721 (business tax), and § 57-4-303 (liquor by the drink tax). The steps described in this article apply to all three tax types.



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