- Office
- Georgia Department of Revenue, usually through its online Georgia Tax Center
- Filing
- A tax clearance certificate, requested for the seller's sales tax and withholding accounts
- When
- Request it early, because money may sit in escrow until the certificate arrives
Watch for: Treating the buyer's lawyer as the one who handles it. A seller who has not asked for the certificate can watch part of the price sit frozen at closing.
What Successor Liability Means
The Georgia Department of Revenue says the buyer of all or part of a business, including its inventory or equipment, can be held responsible for the seller's unpaid sales tax and withholding tax. A clause in the contract cannot erase that liability.
A Georgia Supreme Court decision in 2007 held a buyer of nearly all of a company's assets liable for the seller's delinquent sales tax, up to the purchase price. The court noted the buyer could have asked for a clearance certificate.
Why a Seller Should Care
Buyers who know this will not close without protection. They may ask to hold back part of your price until the state confirms your accounts are in good standing, and that hold can last as long as the state takes to respond.
Ask for the certificate early and the hold stays small, or disappears. If you owe money, you will want to know before the table, not at it.
How the Certificate Works
The Department of Revenue recommends the buyer request a tax clearance certificate. If the seller still owes tax, the buyer is told to withhold that amount from the price and release it only when the certificate is issued.
Ask the Department how a request is made today, since portals and forms change. Many sellers start in the online Georgia Tax Center, where their sales and withholding accounts already live.
Getting Your Accounts Ready
- File every sales tax and withholding return, even those showing zero.
- Pay any balance, or set up a payment plan before you list.
- Reconcile payroll records to what you filed.
- Keep copies of what you submit and the date.
Clean accounts make the buyer's lender comfortable too. See what buyers ask for during due diligence.
Where It Fits in the Closing Calendar
Put the request on the checklist when you sign the letter of intent, not the week before closing. Most sales of small companies are asset deals, and those are exactly the sales this rule targets.
After closing, you still owe the final returns. Read certificate of termination after an asset sale and the labor department account guide for the next steps.
Questions for Your CPA and Attorney
Ask what tax accounts you hold, what you owe, how much to hold back and how the certificate will be requested. This page is general information and not tax or legal advice, so confirm every point with your CPA or attorney.
When you are ready for a price range, request your valuation.