Overcoming Sales Tax Challenges in Mergers and Acquisitions: A Guide

• In the past two years, there have been nearly 46,000 mergers and acquisitions (M&As) in the United States.
• However, 70% to 90% of these deals fail, often due to unanticipated tax liabilities discovered during due diligence.
• Past-due sales tax is a common overlooked liability that can jeopardize a deal, potentially exposing up to 10% of a business’s overall revenue.
• Unanticipated sales and use tax deficiencies can lead to the creation of an escrow, often resulting in the business founder forfeiting the money in escrow.
• To avoid sales tax risk in an M&A, due diligence should include a thorough review of the target company’s tax background.
• Additional steps include determining sales tax nexus, reviewing taxability and estimating exposure, evaluating mitigation options, and establishing a tax compliance filing process.
• Sales tax risk is often more easily identified in public companies due to the added scrutiny of public reporting and independent auditing.

Source: taxconnex.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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