Buying a Business in Idaho: How to Avoid Assuming Tax Liability

Find out how to get a tax clearance letter and check for UCC liens in Idaho.

If you are buying a business in Idaho, 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 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 Idaho business also should check state UCC records to make sure the business’s assets are not encumbered by any liens.

Tax Clearance Letter (Successors’ Liability Clearance Letter)

A tax clearance letter (known in Idaho as a successors’ liability clearance letter) states whether a business for sale has sales or use tax debt for which the buyer could held liable. Under Idaho law, if there is unpaid sales or use tax, the buyer must withhold that amount from the purchase price. Otherwise, the buyer will be held responsible for that amount. You can check Section 36:63-3628 of the Idaho Statutes and Section of the Idaho Administrative Rules for further details.

Successors’ liability clearance letters are issued by the Idaho State Tax Commission. Requests for letters can come from the buyer. Requests must be in writing and include the following information:

  • a statement affirming that you (the buyer) are buying the business
  • the name, location, and seller’s permit number of the business you're buying; and either:
    • a statement and signature from the seller authorizing the request (this legally allows the Tax Commission to provide tax information to you, the buyer); or
    • a signed copy of the purchase agreement or earnest money agreement endorsed by both parties.

Note that the buyer of the business will need some kind of authorization or signature from the seller in order to obtain tax clearance. Therefore, if you are buying a business in Idaho, you will need the cooperation of the seller.

Requests for clearance letters should be mailed to:

Idaho State Tax Commission
PO Box 36
Boise ID 83722-0410

The Tax Commission will respond in writing directly to the buyer.

UCC Liens

If you are buying an Idaho 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/lien search on the Idaho Secretary of State (SOS) website. Free searches only provide limited information. For details, you must register and pay a subscription fee. The SOS also has sites where you can check for other kinds of liens, such as state tax liens.

Other Debts

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.

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