Caveat Emptor, "Let The Buyer Beware"

Many states have adopted bulk sale laws that may hold a purchaser in an asset sale liable for a seller's unpaid state tax liabilities. Indeed, approximately forty states currently have bulk sale laws that are intended to minimize the risk that a seller will sell some or all of the company's assets without paying its outstanding state tax liabilities.¹ Under these laws, a purchaser may be held liable for multiple types of state taxes (e.g., sales and use taxes, corporate income taxes, property taxes) that remain unpaid by the seller. Furthermore, the amount of unpaid taxes for which a purchaser may be held liable can, in some cases, exceed the purchase price of the assets acquired.

When acquiring another business, purchasers may perceive an asset purchase (rather than a stock purchase) to be a good way to minimize the amount of state tax liabilities that the purchaser will inherit. Although this may be true, purchasers often must comply with procedural requirements in