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CT DRS Sales & Withholding Tax Stamford, CT: If You’re Considering Purchasing a Business, Do Not Forget About Requesting a Clearance Certificate or You May be Stuck Paying the Bill!

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Education & Training with Tax Rep LLC

Whether your business is located in Stamford, CT or elsewhere, there are a number of pitfalls when purchasing an existing business, and one of the largest is obtaining a Clearance Certificate from the Connecticut DRS for Sales Tax and Withholding Tax.  Failure to do so will leave you not only the proud new owner of a business but a potentially huge state tax problem!

We help many clients purchase and sell businesses, as well as represent companies and their owners before the Connecticut DRS, and we can assure you that failing to obtain a Tax Clearance certificate may be the end of your new business before you collect your first dollar!

To avoid being deemed responsible for the old taxes under the theory of successor liability, Connecticut requires a purchaser to request a clearance certificate from the Connecticut DRS prior to purchasing the assets of a business.  The request will provide a letter from the Connecticut DRS clearing the sale or requesting the Purchaser to withhold a certain amount from the sale.  Those buyers who fail to withhold a sufficient amount of the purchase price as required are liable, to the extent of the purchase price, valued in money, for the seller’s sales and use taxes, admissions and dues tax or income tax withholding liability.

Successor liability arises only in the case of the purchase of a business or stock of goods under a written contract providing for the payment to the seller (or a person designated by the seller) of a purchase price in money or property or providing for the assumption of liabilities of the seller or taking property subject to a liability.

The purchase of a controlling interest in a legal entity that operates a business does not trigger successor liability because the same legal entity owns the business; only the ownership of the legal entity has changed.

It is our experience that the request for the Clearance Certificate itself may trigger a Connecticut DRS sales tax or withholding tax exam of the business.

We cannot recommend enough that potential buyers file a request for Clearance Certificate as soon as possible in the purchase process, as it can take time to obtain a Clearance Certificate from the Connecticut DRS, and buyers and sellers do not want to delay the sale.  However, the sale is worth delaying if it can save tens or hundreds of thousands of dollars of tax liability.

If you have any questions regarding Connecticut DRS Clearance Certificates in Stamford, CT or elsewhere in Connecticut, do not hesitate to contact me at (203) 602-5550 or by email at egreen@convicerpercy.com

Eric L. Green, Esq.

Convicer, Percy & Green, LLP

60 Long Ridge Rd., Suite 202

Stamford, CT 06902

Ph. (203) 602-5550

Fax (203) 286-1311

www.convicerpercy.com

 

 

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