NYS Bulk Sales Tax Rules and Requirements

When a business undergoes a significant change in ownership through the sale of its assets, New York’s bulk sale provisions are a specific set of rules designed to address this situation. These regulations create a formal process that allows the state to identify and collect unpaid sales and use taxes from a seller before the proceeds of the transaction are fully transferred. The framework is built around a notification requirement, which serves as the primary mechanism for the state to intervene and assess a seller’s tax compliance status.

Defining a Bulk Sale and Assigning Responsibility

A bulk sale involves the sale, transfer, or assignment of a business’s assets, either in whole or in part, that occurs outside the normal operational activities of that business. This definition specifically applies to assets directly related to the business’s function, such as its tangible personal property like machinery, equipment, fixtures, and inventory. Transactions involving these types of assets conducted as part of everyday business operations are not categorized as bulk sales. For instance, a retail store selling its inventory to customers is not a bulk sale, but selling all its store fixtures and equipment to another company would be.

The core of the New York bulk sale law places the legal obligation to inform the tax authorities on the purchaser of the assets. The seller is obligated to provide the prospective buyer with Form TP-153, Notice to Prospective Purchasers of a Business or Business Assets, which details the purchaser’s duties. However, a seller’s failure to provide this notice does not absolve the purchaser of their legal responsibility or the potential financial consequences of non-compliance.

Required Information and Forms for Notification

To comply with the state’s requirements, the purchaser must use Form AU-196.10, Notification of Sale, Transfer, or Assignment in Bulk. This is the official document for alerting the New York State Department of Taxation and Finance about the pending transaction.

The form demands comprehensive information to give the tax department a clear picture of the transaction. For the purchaser, this includes their legal name, mailing address, and federal employer identification number. Similarly, the seller’s full legal name, address, and tax identification number must be accurately provided.

Beyond identifying the parties, the form requires a detailed description of the sale itself. The purchaser must list the scheduled date of the sale, the specific location of the assets being transferred, and the total purchase price. The terms of the sale must also be disclosed, specifying whether the payment is being made in cash, with other property, through the assumption of liabilities, or a combination of these methods.

The Bulk Sale Notification Process

Once Form AU-196.10 is fully and accurately completed, the purchaser must adhere to a procedural timeline. The notification must be filed with the Department of Taxation and Finance at least 10 days before the purchaser either takes physical possession of the business assets or makes any payment toward the purchase, whichever event occurs first. The notification can be filed by registered mail, certified mail with return receipt, or by hand-delivering it to the Tax Department in Albany.

After receiving the notice, the Department of Taxation and Finance has five business days to review the seller’s sales and use tax history and issue one of two documents. The purchaser may receive Form AU-197.1, Release of Purchaser’s Liability, which confirms that the seller has no outstanding sales tax liability and absolves the purchaser of any responsibility.

Alternatively, the department may issue Form AU-196.2, Notice of Claim to Purchaser. This form indicates that the seller may owe taxes and that the purchaser must withhold a portion of the purchase price.

Purchaser Liability for Seller’s Taxes

Failure to comply with the bulk sale notification requirements carries financial consequences for the purchaser. If a buyer does not file the required Form AU-196.10 in a timely manner, they become personally liable for any unpaid New York State and local sales and use taxes owed by the seller.

This liability, often referred to as successor liability, is not unlimited. The purchaser’s financial exposure is capped at the amount of the purchase price or the fair market value of the business assets being sold, whichever amount is greater. For example, if the purchase price was $100,000 but the fair market value of the assets was determined to be $120,000, the purchaser could be held liable for up to $120,000 of the seller’s unpaid sales taxes.