If you are buying a business in Alaska, you will want to obtain tax clearance from the state to make sure you are not taking on the seller’s outstanding tax liability. Buyers often assume that if they acquire a business through an asset purchase as opposed to a stock sale then they will not be responsible for any of the seller’s unpaid taxes. However, most states have successor liability rules that allow the transfer of certain tax liability to the buyer even in an asset purchase. Often this type of successor liability is limited to sales and use tax (not applicable in Alaska at the state level) and other excise taxes that a seller collects on behalf of the state.
Obtaining a tax clearance letter from the state is important assurance for a buyer in an asset or a stock purchase that they are not taking on unpaid tax liabilities of the seller. In addition to obtaining tax clearance from the state, a buyer of an Alaska business also should check state UCC records to make sure the business’s assets are not encumbered by any liens.
Alaska does not have a state sales tax. In Alaska, a tax clearance letter (known in Alaska simply as tax clearance) is available to show that a business does not have any unpaid employment security tax. Tax clearances are issued by the Alaska Department of Labor and Workforce Development (LWD).
Use the LWD form headed Tax Clearance Request Form for Successor. If you are buying an Alaska business, you should submit before the purchase or acquisition has been finalized.
The response from the LWD will only indicate:
If you are buying an Alaska business, you’ll also want to make sure the assets you are acquiring are not subject to any liens. You can do this by checking the state’s public records for creditor financing statements. This gives you notice of what secured debt you’ll be acquiring (if any) related to the business’s equipment, inventory, and possibly other items. You will want to do this whether you are buying the business in an asset or stock purchase.
You can do a UCC central file search on the website for the Alaska State Recorder's Office to find out what creditor financing statements are on record. Unless the buyer and seller make other arrangements, a buyer of the business takes that property subject to any prior recorded liens.
If you are buying a business, there are other possible kinds of business debt not covered here that you might want to investigate, particularly in a stock acquisition. This could include, for example, unpaid local taxes, guarantees, or other private contractual obligations.
For all the essential information about buying or selling a business, get The Complete Guide to Buying a Business (Nolo) and The Complete Guide to Selling a Business (Nolo), both by Fred S. Steingold.