Post-Closing Surprise: Avoid Responsibility for FL Business Seller’s Taxes
Alex decides to purchase a restaurant business in Florida. She is excited about the opportunity and works closely with the seller to understand how the restaurant is operated. However, Alex assumes that all financial matters are in order and proceeds with the transaction without conducting a thorough review of the seller’s tax obligations. She completes the purchase, acquiring ownership of the restaurant business.
A few months after the purchase, Alex receives a notice from the Florida Department of Revenue informing her that she is responsible for the seller’s outstanding sales tax liability.
Seller and Buyer Share Tax Liability Under Florida Statutes
If you buy more than 50% of a business, its assets, or stock, you are responsible for any unpaid taxes that the previous owner owes to the Florida Department of Revenue, according to Florida Statutes Section 213.758. This includes liabilities for sales taxes, reemployment taxes, and property taxes which have not been paid by the seller of the business at the time of sale.
Key definitions:
- “Business”: Business includes any activity people do regularly to make money. It does not include one-time sales or things done by individuals who are not running a business.
- “Transfer”: This means giving away or selling part of a business or its assets, like equipment or buildings, but not to regular customers. A transfer happens when more than half of the business or its assets are moved to someone else. It also includes changes in company ownership but not homes or certain real estate without business parts.
- “Tax”: This includes any tax, interest, penalty, or fee managed under Florida Statutes chapter 443 or section 213.05, except corporate income tax. Examples are state taxes like reemployment tax (for unemployment benefits), property tax, sales tax, intangible personal property tax (on things like investments), tourist impact tax, estate tax, and documentary stamp tax (on documents related to money exchanges).
If you buy more than 50% of a business, its assets, or its stock, you share responsibility with the seller for any unpaid taxes. This shared responsibility is limited to the higher amount between the market value of what you bought or the total price you paid, excluding any debts or obligations unless owed to insiders.
Dealing With the Seller’s Tax Liability
Florida Statutes Section 213.758 specifically provides that the buyer may hold back part of its payment to cover the seller’s tax liability. In this case, the tax liability must pay to the Department of Revenue within 30 days after the closing. If the withheld amount is not enough, the seller must pay the difference.
Alternatively, you would probably prefer to avoid having liability for the seller’s taxes at all. To avoid being responsible for the seller’s taxes:
- Make sure all tax obligations are settled before or at the time of closing.
- Get a Compliance Certificate from the Department of Revenue, which shows there is no audit notice and that all taxes have been paid. According to Florida Statutes 213.758, this “clean” certificate means the buyer won’t be liable for the seller’s taxes unless it involves the seller’s close associates.
- Request the department to conduct an audit within 90 days after closing to confirm no tax liability. For instance, if you close the deal on January 1st, ensure the audit is done by March 31st to verify all taxes are clear.
Alex could have taken several steps to avoid being responsible for the seller’s outstanding sales tax liability. She should have verified that the seller had paid all outstanding taxes before finalizing the purchase. Prior to closing on the transaction, Alex should have required the seller to provide a clean Compliance Certificate from the Florida Department of Revenue. By taking these steps, Alex could have protected herself from being surprised by the seller’s unpaid sales tax liability.
Do you have questions about purchasing a business in Florida? Contact us to schedule a consultation with a business attorney.
Because we’re attorneys: Disclaimer. Originally posted 02/09/2025.
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