Wednesday, November 23, 2011

Is the buyer of a business liable for the seller's sales tax obligations?

A purchaser of any business or stock of goods is liable for payment of any amount owed the state by the seller under the Title 2 (Chapters 101 through 211) of the Tax Code up to the amount of the purchase price.

As such, the purchaser must, at the time of purchase, withhold a sufficient amount from the purchase price to pay any amounts due including penalties and interest or any other amounts assessed or to be assessed against the seller.

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.

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.

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 then 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.

If you are buying or selling a business, feel free to contact our Dallas office to discuss at (214) 206-1999 or via email at info@copplaw.com.

What happens if your spouse forgets to remove his/her ex as a life insurance beneficiary?

Under the Texas Redesignation Statutes, a pre-divorce decree designation of an ex-spouse as the beneficiary of a life insurance policy is void. For example, John Doe was married to Jane Doe and designated her as the beneficiary of his life insurance policy in 2000. In 2005, John and Jane get a divorce. In 2009, John passes away. Jane would NOT be entitled to receive the proceeds of the life insurance policy.

Understandably, there are a few exceptions to this general rule: (1) if the divorce decree ratifies the pre-decree designation; (2) if the insured redesignates the former spouse as the beneficiary after the date of the divorce; or (3) the Texas Redesignation Statutes to not apply to ERISA death benefits.

If a designation is void as a result of the redesignation statutes described above, the proceeds of the policy should be paid to the named alternative beneficiary or, if there is not a named alternative beneficiary, to the estate of the insured.

If you believe that you are entitled to the proceeds of a life insurance policy as a result of the redesignation statutes, we highly recommend that you contact an attorney as soon as possible to make a claim on your behalf. Please note that as long as the life insurance company pays the death benefit to the original beneficiary before receiving proper notice from an alternate beneficiary, they are off the hook and will not be liable to the alternate beneficiary!