The California Franchise Tax Board recently issued a reminder notice for employers that have acquired the assets of another business- whether through purchase, transfer, inheritance, or liquidation. Regardless of means of acquisition, the successor employers are personally liable for the withholding tax liabilities, plus any applicable interest and penalties, of the predecessor business that was acquired (RT&C Section 18669).
Read the notice in its entirety here.
image credit: frozenchipmunk
Not sure if you are a successor employer? Download a recent ETS presentation that includes slides reviewing what qualifies one as a successor employer.
The California Employer’s Guide defines a successor employer as:
“An employer who has acquired all or part of another employer’s (predecessor) business and continues to operate the business without substantial reduction of personnel resulting from the acquisition.”
If you are a successor employer, your liability is limited to the fair market value of the assets you acquired. According the Franchise Tax Board notice:
“You are required to withhold in trust a sufficient part of purchase price or set aside in trust money or property to cover the amount of the taxes required to be withheld and any interest or penalties associated with the withholding tax obligation(s) that are due or unpaid by the business entity (payer).”
According to the Franchise Tax Board, successors of a California business (or their representative, escrow officer, or title officer) may submit a written request for bulk sale certificate and fax it to916.845.9034.
The written request should include:
- Name of successor
- Complete successor’s mailing address
- Escrow company’s name
- Complete escrow company’s address, phone, and fax
- Escrow officer’s name
- Escrow number
- Sales price
- Estimated closing date
- Name of business being transferred
- Physical address of business
- Liquor license number (if any)
- Payer name
- Complete payer physical address
- State tax account number
Download slides from ETS’ May 2013 presentation on UI and Hiring credits for California employers. There are several slides in this presentation specifically addressing successor employers in the state of California.
If you are a California employer (or acquired assets from a California employer) you may also want to read our earlier blog post regarding a major SUTA dumping case heard by the California Court of Appeals.
Have you had M&A or restructuring?
Don’t be an easy SUTA Dumping profile target! Click the button to access download for the “10 Point SUTA Dumping Assessment” checklist.
Disclaimer: This article is general in nature and is not intended to replace the guidance of an employment tax expert and/or legal professional with regards to an appropriate course of action in your particular circumstances. Please consult with a professional for appropriate advice in your case. Pursuant to IRS “Circular 230” rules, any information included herewithin is not intended or written to be used for the purpose of avoiding penalties under the federal Internal Revenue Code.