When you purchase a New York business, you will need to pay sales tax on the value of the personal property included in the sale.\u00a0 The sales tax rate depends on the county in which the business is located. In the counties comprising New York City, the sales tax rate is 8.875%.<\/p>\n
Your purchase agreement will typically allocate the purchase price of the business among various items, for example, Good Will, a Covenant Not to Compete, a Lease, Inventory, Equipment and Motor Vehicles.\u00a0 Sales tax will be due on the value allocated to the personal property; in this example, the equipment and motor vehicles.<\/p>\n
To comply with the New York State sales tax law,\u00a0 you must\u00a0 file form AU-196, Notification of Sale, Transfer or Assignment in Bulk<\/a>, at least ten days prior to the closing of the transaction.\u00a0\u00a0 In the form, you allocate the purchase price among the various items as set forth in your contract of sale.\u00a0 Based on this allocation, the Tax Department will send the purchaser an invoice for the sales tax.\u00a0\u00a0 Additionally, the\u00a0 Tax Department will perform an audit to determine if the seller has any unpaid sales tax liability.<\/p>\n If your\u00a0 closing takes place\u00a0 prior to the State’s determination of the seller’s sales tax liability, the tax law provides that the State can look to the purchaser for payment of any sales tax which may be due from the seller.\u00a0 Most purchase agreements therefore will\u00a0 provide for a portion of the purchase price to be held in escrow by the seller’s attorney until a final determination by the Department of Taxation of the seller’s sales tax liability, if any. Any sales tax liability of the seller will then be paid from this escrow<\/p>\n The allocation of the purchase price in an agreement to purchase a business will have other tax consequences in addition to determining the sales tax so it’s advisable to consult with your attorney and accountant when making the allocation in your contract.<\/p>\n","protected":false},"excerpt":{"rendered":" When you purchase a New York business, you will need to pay sales tax on the value of the personal property included in the sale.\u00a0 The sales tax rate depends on the county in which the business is located. In … Continue reading