The Connecticut Department of Revenue Services released Information Publication 2011(16) which states that a purchaser who fails to withhold a sufficient amount of the purchase price as required, is liable, to the extent of the purchase price, valued in money, for the seller’s sales and use taxes, admissions and dues tax or income tax withholding liability.

For Connecticut sales and use taxes, admissions and dues tax, and income tax withholding purposes, successor liability applies where:

One or more persons purchase the business or stock of goods of a seller (including a seller who quits the business or transfers it for little or no consideration); or

One or more persons purchase a portion of the business or stock of goods of a seller (including a seller who quits the business or transfers it for little or no consideration).

Successor liability arises only in the case of the purchase of a business or stock of goods under a written contract providing for the payment to the seller (or a person designated by the seller) of a purchase price in money or property or providing for the assumption of liabilities of the seller or taking property subject to a liability. Successor liability does not arise in connection with the transfer of a business or stock of goods in a foreclosure, repossession, or in a bankruptcy, or receivership. Successor liability does arise, however, in the case of a sale made to avoid an imminent foreclosure, repossession, bankruptcy, or receivership.

The purchase of a controlling interest in a legal entity that operates a business does not trigger successor liability because the same legal entity owns the business; only the ownership of the legal entity has changed.

To avoid successor liability, a purchaser of a business or of a stock of goods should request a tax clearance certificate. The purchaser may request the tax clearance certificate on or after the date the purchaser commits to purchasing the business or stock of goods and before the date of the closing. If the purchaser receives an escrow letter from DRS, DRS will not issue a tax clearance certificate until the amount required to be withheld has been paid by the purchaser to DRS.