Before you buy an existing business, find out if the business owes any Texas taxes. If you plan to buy an existing business, the inventory of an existing business or the name and goodwill of an existing business, be sure to contact the Comptroller’s office and request a Certificate of No Tax Due. Failing to do so makes you (the purchaser), liable for any past due state taxes or fees, plus any interest and penalties that are owed by the business.
Texas Tax Code Section 111.020 provides that if a person who is liable for a tax sells the business, the purchaser must withhold an amount of the purchase price sufficient to pay the amount of any taxes due unless:
If the current business owner owes taxes and escrow closes without a Certificate of No Tax Due, the purchaser is liable for the unpaid taxes up to the purchase price for the business, including any assumption of indebtedness. The Certificate of No Tax Due must be requested before the sale closes in order to absolve the purchaser of liability.
Only the purchaser is protected by a Certificate of No Tax Due. The seller of the business will remain responsible for any and all tax, penalty, and/or interest liabilities that occurred prior to the date of the sale. If the business was not actually sold, any Certificates of No Tax Due issued have no effect and the seller will continue to owe any liabilities due.
Due to changes made by Senate Bill 873, 87th Texas Legislature, the seller and purchaser of the business or assets must jointly request the Form 86-114, Joint Request for Certificate of No Tax Due (PDF). All fields must be completed and the form must be signed by authorized representatives of both the seller and the purchaser. If a closing agent is requesting the document(s), their information must be included on the form. The completed form must be sent to the Comptroller’s office by one of the following methods:
There is no charge for the certificate.
Comptroller staff will review the request for a Certificate of No Tax Due and, if necessary, audit the seller’s business records. One of three results will be sent to the requestors:
The Certificate of No Tax Due is tax specific. When a request for a Certificate of No Tax Due is received, the Comptroller's office will review all state taxes for which the business is permitted or otherwise determined to be liable. Each tax will be addressed separately. For instance, if there is an outstanding liability for one tax type, it will not hold up the issuance of certificates for other tax types for which the seller is permitted. Tax types for which the seller is not permitted are not eligible for a Certificate of No Tax Due.
If the Comptroller’s office determines the current business owner owes taxes and does not issue the Certificate of No Tax Due, the Comptroller's office will issue a Statement of Account to all parties showing the amounts due. The purchaser is required to withhold a sufficient amount from the purchase price of the business to cover any taxes, penalty and interest owed until the seller produces one of the following:
The Comptroller’s office will review taxes for which the permit has been closed, if the account was closed within the past four years. The Certificate will indicate an issued-through date showing the last date the seller was permitted. The Comptroller's office will not review accounts for which the permit has been closed more than 4 years.
Tax liability amounts are confidential and can only be released to authorized individuals.
Processing a request for the Certificate of No Tax Due can take up to 90 days if an audit of the seller’s books and records is necessary. If an audit is not required, the Certificate of No Tax Due or Statement of Account listing the amounts owed is usually issued within 10 business days from the date of receiving a proper request on Form 86-114.
Following these helpful hints may reduce turnaround time on requests for Certificates of No Tax Due:
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