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RULE §3.7Successor Liability: Liability Incurred by Purchase of a Business

(a) A purchaser of any business or stock of goods is liable for payment of any amount owed the state by the seller under the Tax Code, Title 2. The purchaser must, at the time of purchase, withhold a sufficient amount from the purchase price to pay any amounts due. The amount withheld must equal all tax, penalty, and interest or any other amounts assessed or to be assessed against the seller. The purchaser shall not be liable for an amount greater than the purchase price of the business or stock of goods.

(b) A purchaser's duty to withhold the amount owed by the seller will continue until the seller presents to the purchaser a certificate from the comptroller stating that no tax is due. Failure of the purchaser to withhold and remit to the comptroller the required amount makes the purchaser liable for such amount to the extent of the purchase price.

(c) The purchase price shall include, but not be limited to, monetary consideration, assumption of debt, transfer of property, forgiveness of debt, or issuance of debt instruments.

(d) When determining if a "business" has been or will be sold, the comptroller will examine the transaction to determine what the parties to the transaction intended to buy and sell. The answer in each situation will depend on the type of business involved. A seller may have sold a "business" even when few assets were transferred. Depending on the type of business involved, a "business" may be sold if an owner sells:

  (1) a building, land, furniture, fixtures, inventory, and the right to use the seller's trade name; or

  (2) all the capital assets of a business; or

  (3) the name and goodwill of a business; or

  (4) all the inventory of a business; or

  (5) fixed assets and realty necessary to operate a similar business as the seller at the same location.

(e) A certificate stating the amount due or that no tax is due may be obtained in the following manner. The seller, the seller's assignee, or purchaser must make a written request for the certificate before the sale of the business is completed. The comptroller must issue a certificate to the seller within 60 days after the records are made available by the seller for audit or within 60 days after receiving the written request for the certificate, whichever period expires later, but in any event not later than 90 days after receiving the written request. If any amount is found to be due, it must be paid before the certificate will be issued. Failure of the comptroller to timely issue the certificate to the seller will release the purchaser from any further obligation to withhold an amount from the purchase price. Effective January 1, 1992, the Government Code, §403.301, requires the comptroller to collect a fee for each certificate issued.

(f) The seller must inform the comptroller in writing of the name and address of the purchaser and must file a final report immediately after the sale of the business.

(g) The collection, refund, and penalty provisions of the Tax Code, Title 2, Subtitle B, apply to payments required under successor's liability. Failure of a purchaser to pay the assessment of successor's liability in a timely fashion or to request a hearing thereon will result in a penalty of 10% as provided by the Tax Code, Title 2, Subtitle B, in addition to any amounts of penalty previously assessed against the seller. Successors cannot challenge the validity of the underlying liability of the predecessor.

(h) The sale of a business or stock of goods by a bankruptcy trustee or by the administrator, executor, or guardian in an estate or probate proceeding is not a sale by a vendor or former owner for purposes of this section and the purchaser will not incur liability hereunder.

Source Note: The provisions of this §3.7 adopted to be effective June 9, 1992, 17 TexReg 3842.

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