A business may decide to sell all or a substantial amount of its business assets to another individual or company for a variety of reasons. These types of transactions are known as "bulk sales" if they are not part of ordinary business activities. Both New York and New Jersey require businesses that collect sales tax to disclose a planned bulk sale to state tax authorities. This disclosure is the purchaser's obligation, since the purpose is to allow the state to determine the seller's tax liability. If the purchaser does not make the required disclosures, it could become liable for the seller's outstanding tax debt to the state. The disclosure process is not terribly complicated, but it appears to be one that many businesses forget in the course of purchasing another business' assets.
What Is a "Bulk Sale"?
Any sale of business assets that is not part of the normal course of business could qualify as a bulk sale under state law. A bulk sale may occur if a company is going out of business, upgrading its equipment, or making significant changes in its business activities. Bulk sales may also occur in mergers or acquisitions, or if a business is converting from a sole proprietorship to a corporation or other business entity.
"Business assets" include any assets used in the course of business, including:
- Personal property, such as computers, office furniture, and inventory;
- Intellectual property, including patents, trademarks, and trade secrets;
- Certain types of real property; and
- Intangible assets, like business goodwill.