HAVE CLIENTS THAT ARE CONSIDERING BUYING OR SELLING A FLORIDA BUSINESS? – THE LAW CHANGED 4-6-2012 – Sec. 213.758, F.S.
Prior to April 6, 2012, the purchaser (transferee) of a business ASSUMED the past sales and use tax and communication service tax liabilities of the purchased business (transferor) without a full audit by the Florida Department of Revenue blessing the transaction (or by a certified sales tax auditor). See §§ 213.758, 213.053, 213.10, 212.10, and 202.31, 2011 Florida Statutes ("F.S."). Think about it – an audit is bad enough. Does the seller of a business really want to initiate an audit in order to sell the business? What purchaser would be willing to buy the business without one?
The prior statutes were stifling the market of buying and selling businesses in Florida and savvy purchasers often required large contingency escrow accounts to hedge against adopting potentially large, unknown Florida tax liabilities. The escrow account would often need to stay in place for 3 years to allow the statute of limitations to run on Florida's ability to assess the relevant taxes. What surprised many people is the same egregious rule forced liability on the buyer even when the buyer only purchased substantially all the assets of a business. To make matters even worse, most business purchasers could reasonably mark on their calendar a big "X" 30 days from the date when the DOR received notice that the business had been purchase. The X would represent the deadline by which the new purchaser would receive a Form DR-840: Notice of Intent to Audit Books and Records for the old business.
To address this problem, two identical bills were introduced into Florida's Congress to provide relief to both buyers and sellers of businesses in Florida. House Bill 103 was filed by Representative WOOD on August 25, 2011 and the identical Senate Bill 170 was filed by Senator ALTMAN on August 29, 2011. After 8 months of haggling in the Florida Legislature, on April 6, 2012, Governor Rick Scott signed into law a combined version of these bills. There are various provisions in the new law, but the heart of the matter is that the buyer of a business can now purchase a business or substantially all the assets of a business without assuming the sales and use tax and communication services tax liabilities of the prior business if:
- The transferee (buyer) receives a certificate of compliance (DOR provided document) from the transferor (seller) showing that the transferor (1) has not received notice of audit, (2) has filed all required tax returns, (3) has paid the tax due from those returns, and (4) there are no insiders in common between the transferor and the transferee; OR
- The Department of Revenue conducts an audit, at the request of the transferee or transferor, and finds that the transferor is not liable for any taxes.
In addition, the new law provides that section 213.758, F.S., would not impose liability on a transferee of a business, assets of a business, or stock of goods of a business when:
- The transfer is an involuntary transfer; or
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The transferee is not an insider; and
- The asset transferred is a 1 to 4 family residential real property, real property that has not been improved with any building, or owner-occupied commercial real property; and
- No other assets of the business are included in the transfer.
The net effect of new law brings much greater certainty to the buyer of businesses (or unsuspecting buyer of substantially all the business assets) and make Florida businesses both more marketable and more valuable in the process. The new law amends sections 213.758 and 213.053, F.S., and repeal sections 212.10 and 202.31, F.S., and became effective immediately upon being signed into law. A redacted version of the new section 213.758 (Chap. 2012-55) is downloaded below so you can see the exact verbiage of the statute that changed.
If you or a client of yours has been considering buying or selling a Florida based business, then you should read the new law (downloadable below). Both buyer and seller may come out ahead if the transaction takes place after the effective date of the law - April 6, 2012.
If you are considering buying or selling a business in Florida, then make sure you have someone very knowledgeable in Florida State and Local Tax on your side of the table. Our firm consists of Florida licensed CPA's and Attorneys with strong state and local tax backgrounds and a primary practice are of Florida State and Local Tax Law. Contact us today for a free initial consultation about your proposed or executed business sale.
ABOUT THE AUTHOR: MR. SUTTON IS A FLORIDA LICENSED CPA AND ATTORNEY AND A SHAREHOLDER IN THE LAW FIRM the Law Offices of Moffa, Sutton, & Donnini, P.A. MR. SUTTON IS IN CHARGE OF THE TAMPA OFFICE FOR THE FIRM AND HIS PRIMARY PRACTICE IS FLORIDA TAX CONTROVERSY. MR. SUTTON WORKED FOR THE STATE AND LOCAL TAX DEPARTMENT OF A BIG FIVE ACCOUNTING FIRM FOR A NUMBER OF YEARS AND HAS BEEN AN ADJUNCT PROFESSOR OF LAW AT STETSON UNIVERSITY COLLEGE OF LAW SINCE 2002 TEACHING STATE AND LOCAL TAX, ACCOUNTING FOR LAWYERS, AND FEDERAL INCOME TAX I. YOU CAN READ MORE ABOUT MR. SUTTON IN HIS FIRM BIO.
AUTHORITY
§ 213.758, F.S., Transfer of tax liabilities
§ 213.053, F.S., Confidentiality and information sharing
§ 213.10, F.S., Deposit of tax monies collected
§ 212.10, F.S., (REPEALED) Sale of business; liability for tax; procedures; penalty for violations (Sales and Use Tax)
§ 202.31, F.S, (REPEALED) Sale of business; liability for tax; procedures; penalty for violations (Communication Services Tax)
Florida Senate Bill 170 (2011) (ANALYSIS)
Florida House Bill 103 (2011) (ANALYSIS)
Chapter No. 2012-55 <--(redacted version of the statutes amended by this new law)
COPY OF LETTER SIGNED BY GOVEROR RICK SCOTT - ENACTING NEW LEGISLATION ON 4-6-2012