CALIFORNIA SALES AND USE TAX PROVISIONS
The Sales and Use Tax Law is relevant to the transfer of a retail business which sells tangible personal property.
Of particular importance are:
• a “clearance receipt” confirming payment of state and local sales taxes so that the buyer is protected from
“successor’s liability”;
• releases or subordination agreements covering sales tax liens against real or personal property; and,
• the tax liability on that portion of the sale price allocated to the personal property to be used in the business.
Successor’s Liability
In the sale of a business opportunity or stock of goods, the buyer must hold back enough of the selling price to
cover any outstanding tax liability.
The successor’s liability extends to taxes incurred with reference to the operation of the business by the or any
former owner.
The purchaser of the business or stock of goods will be released from further obligation to withhold funds from
the purchase price if he obtains a certificate from the Board of Equalization stating that no taxes, interest, or
penalties are due from the seller or any previous owner.
The liability is enforced by service of a notice of successor liability. The successor may petition the Board of
Equalization for reconsideration of the liability.