For business transactions occurring in the State of New Jersey, the New Jersey State Division of Taxation imposes an absolute liability and obligation on the New Jersey business “purchaser” to provide the State with a “pre-closing” notification of the proposed business sale, the terms of the sale and the anticipated date of closing. This pre-closing notification, referred to as a “Bulk Sales Notice” (but formally identified by the State as a “Notification of Sale, Transfer or Assignment in Bulk”) should be prepared by your business attorney and must be filed with the New Jersey State Division of Taxation no less than 10 days prior to the business closing. The purpose of this notification is to assist the State with their sales tax audit and collection efforts, i.e., when the taxation authority receives the notification, the State will examine the “seller’s” tax records and make a determination as to whether or not the “seller’s” tax records are current and whether or not the “seller” owes any outstanding sales tax. If outstanding sales taxes are due by the “seller”, the State of New Jersey imposes a liability and obligation on the business “purchaser” to pay the “seller’s” outstanding sales tax from the business purchase proceeds due from the purchaser to the seller at closing.
Procedurally, the bulk sales notice must be timely pre-filed with the New Jersey Division of Taxation. Once this notice is timely pre-filed, the State will review the Seller’s tax records and make a determination as to an amount due or an amount to be set aside and held in escrow at closing. Provided that you have timely notified the State and have set aside the appropriate escrow of funds demanded by the State, you may proceed with the closing without any further liability for the seller’s sales taxes.
If you fail to comply with the New Jersey State bulk sale notification and collection obligations, the State of New Jersey can and will hold you personally responsible for the payment of the seller’s outstanding pre-closing sales taxes. This obligation may be substantial and is an unnecessary problem that occurs in far too many transactions. While this issue must be addressed by your business attorney, it is important that, as a business purchaser, you be aware of this “hidden” liability.
We recommend also reading the following articles by New Jersey Business Lawyer, Charles N. Internicola:
For additional information on how our office assists clients in business purchases contact us by phone at (800) 976-4904 or (718) 979-8688 or contact The Internicola Law Firm, P.C. by email.
Franchising may be the next big step for someone who wants to grow their business. Below are questions you should ask yourself to be able to answer if you should or shouldn’t franchise your business. How do you know whether or not you should franchise your business? First, you have... read more
In this guide you’ll learn the basics of franchising, how to franchise your business, and how to win at franchising. We’ll also take a deeper dive into legal requirements for franchising and why they matter, steps to take before and after you launch your franchise, and even some tips on... read more
When considering expanding a business both franchising and licensing are possible options. In this guide, you'll learn the differences of franchising and licensing and understand how each will affect you. read more
Are you a successful business owner? Are you looking for ways to expand your business? If so, this article will provide the answers you need to decide whether franchising your business is the right step for you. In short, franchising allows you, the franchisor, to create a relationship among several... read more
Under federal law, prior offering or selling a franchise in any state, franchisors are required to disclose a franchise disclosure document (FDD) to their prospective franchisees. In addition to federal law certain states, including the franchise registration states, require that franchisors register their FDD with the state. The legal documentation... read more
For very good reasons, the questions of “is my business franchisable?” and “can my business be franchised?” come up often. Assuming that you possess the right mindset and franchise goals (a topic that we discuss in a separate article) there are core franchise factors that either your business must possess... read more
Key strategies to accelerate franchise growth for startup and emerging franchisors In this webinar, franchise attorney Charles Internicola and Nick Powills, founder of No Limit Agency and 1851 Franchise, discuss key strategies to accelerate franchise growth through PR and digital media. Some topics include: Steps franchisors should take when it... read more
One of the biggest issues for emerging franchisors is not having a plan for insurance and system-wide protection. What do emerging brands need to know when they're starting off, who should they rely on, and how can they plan ahead? Get an insurance game plan to protect your franchise system... read more
Key strategies for developing the right logo & trade dress to drive franchise growth with branding and design expert Dan Antonelli. Dan is the author of ‘Building a Big Small Business Brand’ and is the creative director of the branding firm KickCharge Creative. Learn how to drive franchise growth and... read more
With services to make your growth strategy simple, cost effective, and with a team excited to help you, let’s talk about how we can help grow your business.
Fill out the following form and we’ll contact you as soon as possible. To reach our team directly, give us a call at (800) 976-4904.