Transfer Of Business Assets In Florida May Come With State Tax Liability

A recently enacted Florida statute clarifies that the transfer of a Florida business’s assets is considered a sale of the business and that the sale may come with Florida tax liability.  Florida Statute § 213.758 states that when a taxpayer who is liable for taxes with respect to a business transfers either the business, the assets of the business, or the stock of goods of the business, the taxpayer must file a final return and make full payment of taxes within 15 days after the date of the transfer.  The statute goes on to state that a transferee, or a group of transferees acting in concert, who receive more than 50% of a business, the assets of a business, or the stock of goods of a business, may be held jointly and severally liable along with the transferor for any unpaid tax owed by the transferor and arising from the operation of that business.  There are a few listed exceptions to this rule:

• Where the transferor provides a receipt or certificate of compliance from the DOR to the transferee which shows that the transferor has not received a notice of audit and that the transferor has filed all required tax returns and has paid all tax arising from the operation of the business identified on the returns filed; and
• There were no insiders (e.g. a partner, shareholder, officer, director, manager, managing-member, or the family members) in common between the transferor and the transferee at the time of the transfer; or
• The DOR finds that the transferor is not liable for taxes, interest, or penalties after an audit of the transferor’s books and records. The audit may be requested by the transferee or the transferor and may be done either as a certified audit or by the DOR within 90 days after the records are made available to the department.

The statute authorizes the transferee to withhold a portion of the consideration for the purchase to pay the tax owed to the state.  The transferee must pay the withheld consideration to the state within 30 days after the date of the transfer and if the amount which is withheld is less than the transferor’s liability, the transferor remains liable for the deficiency.  The statute also authorizes the Department of Legal Affairs to seek an injunction to prevent further business activity on the part of the transferee until the tax is paid.

This is just one more reason to consult with a Florida tax attorney before purchasing a Florida business or its assets.  Failure to comply with the statute could find the purchaser liable for the seller’s unpaid taxes.

If you are considering buying or selling a Florida business, contact a Florida tax attorney who can properly advise you on the transaction.