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  Registration for Business Taxes
    Buying a Business

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  Buying a business that owes back taxes
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Q. What if I buy a business that owes taxes?

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A. As a new owner, you may be held liable to pay the sales and use or admissions taxes of the previous owner unless you obtain a Tax Clearance Certificate from the Department of Revenue Services.  Successor liability is the obligation of the purchaser (successor) to withhold a sufficient amount of the purchase price to cover any sales and use tax liability or admissions and dues tax liability of the seller until the seller (predecessor) produces a receipt from the Commissioner of Revenue Services showing that any tax liabilities have been paid or a certificate stating that no amount of tax is due.  Under successor liability, the purchaser of a business is liable for the taxes of the previous owner to the extent of the purchase price of the business unless the purchaser obtains a Tax Clearance Certificate from the Department of Revenue Services (DRS).

Successor liability applies where:

  • A person voluntarily sells a business; or
  • Transfers all or substantially all the assets of a business to one or more purchasers.

Voluntarily means a person sells the business on its own initiative (even if it is motivated by financial, health, or personal concerns) as opposed to a person selling the business because of bankruptcy, court ordered sale, or the like. For more information on this topic, please review IP 2002(16), Successor Liability for Sales and Use Taxes and Admission and Dues Tax.

This answer is intended to provide general information concerning a frequently asked question about a current position, policy, or practice associated with the taxes administered by the Connecticut Department of Revenue Services.  It may include an informal interpretation of Connecticut tax law by the Department of Revenue Services (DRS).  However, it is not intended to serve as a legal ruling.

 
 
 
  
 
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