- M&A deals can be affected by a company’s past sales tax exposure and liability.
- Mitigation involves further research or using jurisdiction programs.
- Companies must register for sales tax in states where they have nexus and follow filing requirements.
- Statute of limitations for sales tax issues can range from three to four years if registered, or seven to ten years if not registered.
- Not all sales incur sales tax; exemptions exist for resale, nonprofits, and certain organizations.
- Customers must provide tax exemption certificates, which should be verified during due diligence.
- Prior liabilities may require contacting customers to validate exemptions and obtain certificates.
- Mitigation options include registering with the state or entering a voluntary disclosure agreement (VDA).
- Registering allows prospective compliance but may lead to audits of past performance.
- VDAs offer penalty abatement and a limited lookback period, requiring disclosure of past liabilities and payment of taxes and interest.
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.
