When a person buys the assets of a business some assets are subject to sales or use tax, while others are not.
Items subject to retail sales tax
The following items (tangible personal property) are subject to sales tax:
- Capital assets such as machinery and equipment, office furniture, and vehicles
- Consumable supplies such as office supplies, stationery, forms, canned software and magazines
Generally, the sales tax should be collected by the seller and then paid to the Department. However, if the seller does not collect the sales tax, then the buyer must pay use tax directly to the Department on the tangible personal property acquired in a real estate purchase.
Items not subject to retail sales tax
The following items are not subject to sales tax:
- Real estate
- Inventory, if the buyer intends to resell it (the buyer must give a reseller permit to the seller.)
- Intangible assets such as good will, stocks and bonds, etc.
As the buyer of a business, you could be liable for the unpaid taxes of the former owner. Therefore, you should require the seller to provide a Tax Status (pdf) letter with regard to any outstanding taxes owed by the business. You are required to withhold from the purchase price the amount of any outstanding taxes due from the seller. See WAC 458-20-216 for more information about successor liability.
A transfer of capital assets is not taxable to the extent the transfer is accomplished through an adjustment of the beneficial interest in the business. See WAC 458-20-106.