©Jones Day 2011
information is inaccurate, or if it is not supplied at least 10 business days prior to the closing, the
notice will be considered invalid.
8
Upon receipt of the Form C-9600, the Division “reviews for
all state taxes which include deficiencies . . . , delinquencies . . . , assessments, penalties, interest,
fees and costs.”
9
The Division broadly defines “business assets” as referring to tangible and intangible
assets, including, but not limited to, “goodwill, materials, supplies, licenses, patents, copyrights,
equipment, leases, merchandise or other inventory and realty
10
if the primary use of the realty is
to support a business on its premises.”
11
It should also be noted that the the New Jersey bulk sale
notice requirement may be triggered by a sale of business assets located outside New Jersey.
However, if the buyer has no connection to New Jersey, it is likely that the Division would have
to overcome jurisdictional challenges to impose a transferee liability on the buyer.
Upon receipt of the completed Form C-9600, the Division has 10 business days to notify
the purchaser of a possible claim for state taxes, include the amount of the claim, and require the
purchaser to hold that amount in escrow.
12
It should also be noted that, separately from any
possible seller’s outstanding tax liabilities, the Division requires the seller to complete and file an
Asset Transfer Tax Declaration (“Form TTD”) estimating the tax due on the gain from the sale
of the assets.
13
The Division expects this estimated tax to be remitted by the purchaser from the
escrowed amount.
The failure to escrow an amount sufficient to satisfy the seller’s outstanding tax liabilities
may result in transferee liability to the purchaser for the outstanding balance.
14
Therefore, to
protect themselves, buyers should negotiate escrow agreements well in advance of the closing.
Additionally, the escrow agreements should require sellers to contribute their own funds to the
escrow to the extent the tax liability may exceed the sales proceeds or if no proceeds are
transferred in connection with the sale of the business assets.
The cherry on top is the Division’s position as to what constitutes “a sale, transfer, or
assignment in bulk of any part or the whole of the person’s business assets.”
15
According to the
Division, the sale of any asset outside the ordinary course of business triggers the bulk sale
8
Id.
9
Id., Question 2.
10
The bulk sale notice requirements do not apply to sales of single noncommercial dwelling units and sales
of seasonal rental units, such as timeshares. N.J. Rev. Stat. § 54:50-38(a)(2).
11
N.J. Division of Taxation Tech. Bull. No. TB-60 (June 30, 2008).
12
FAQ, Law and Procedures for the Filing of the C-9600 Form, Question 24 (Dec. 6, 2010).
13
The Division cites N.J. Rev. Stat. § 54:50-38 (i.e., the bulk sale notice statute) in support of this
requirement, stating that the provision instructs the Division to notify the purchaser of business assets “of any
possible claim for State Taxes.” Form TTD.
14
FAQ, Law and Procedures for the Filing of the C-9600 Form, Question 30 (Dec. 6, 2010).
15
N.J. Rev. Stat. § 54:50-38(a).