Bought the assets of a business (website URL, brand name, customer list) but started a new LLC. Bought the assets for a small amount (less than $15k), we didn’t want to buy the corporation/company because we didn’t want to deal with surprise liabilities, etc.
Anyway CDTFA (california tax) is chasing the owner of the original company for what I imagine are small potato amounts if we bought the assets for less than $15k. Maybe he’s unresponsive so CDTFA is bugging us instead. I’ve told CDTFA we don’t work with that guy anymore, he retained is corporation, we only bought assets and operating our own LLC and the transaction between us has been closed and completed. CDTFA says we needed some tax clearance before transfer of ownership (weird if we didn’t buy the corp). CDTFA says we’re on the hook for garnishment. We’re a micro business in startup mode don’t know why they are wasting time and resources on us for something we don’t even owe them.
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Do your purchase documents itemize sales tax paid on the taxable asset sales?
Do your purchase documents itemize sales tax paid on the taxable asset sales?
Yeah, it’s California.
I bought a plane from a guy who lived in California - I flew commercial to meet him in Vegas, then I flew the plane all the way back home to nearly the Atlantic ocean.
Of course California threatened to sue me because I wasn’t paying them taxes on the aircraft, even though I don’t live there and I’ve never flown the plane there. Ended up getting it fixed, but from what I can tell California will go after any revenue they think they have even a tangential claim to, and if they think you can be intimidated, tricked, or otherwise forced to pay then they have no problem doing so.
Wow that sucks, seems like the seller in California should’ve been on the hook for that one. Maybe your home state when you register the plan there. Weird that California went after you.
I definitely got the intimidation vibes. I don’t even know what the other guy’s tax liability is or where I can get more info about it and next thing I was hearing was that our business will get garnished. I asked if she could explain what the basis was and if she could also send a document showing it and she refused to talk to me to explain it and said it’ll just arrive in the mail.
Did you use an attorney for the purchase agreement? Every asset sale I’ve dealt with in California has a sales tax clearance as part of the deal, for this particular reason. If the seller didn’t pay sales taxes you didn’t buy the assets free and clear, at least that’s how the CDTFA views it. Your best bet is to call the seller and convince him/her to settle with CDTFA, otherwise they will continue collection efforts from you.
Thanks for the info, we used an attorney but it was a simple bill of sale for specific assets from the seller’s corporation (customer list, vendor accounts, website URL and brand name). Seems weird that there’s a need to get tax clearance, I don’t see how that’s different from buying a product or used equipment.
To be clear, it’s still the seller’s tax liability, right? You’re just saying that somehow CDTFA has powers to force my LLC to pay it or to force my LLC to be responsible for chasing the seller? Sounds like BS that they’re putting it on us and that they’re spending resources to squeeze us instead of going after those that really owe taxes.