A question from a business buyer who recently inquired:
Do I have to pay California State Sales Tax if I purchase a business?I am turning this one over to a BizBen Blog Contributor -
Joe Robertson, President of Southern California Business Brokers - to answer this question for this reader:
"To answer that properly we have to look at the way the business is purchased. There are two ways a business can be purchased, a Stock Sale or an Asset Sale. If you purchase a corporation (C-Corp. or S-Corp.) thru a “Stock Sale” technically you are only purchasing the stock and the stock is not subject to California state sales tax. On the other hand, if you purchase the business through an Asset Sale (the vehicle by which most small “Main Street” business are bought and sold), a portion of the purchase price can be subject to California state sales tax. But remember it is not the total price of the business, but only the portion of the price that is allocated to furniture, fixtures and equipment. This portion is subject to sales tax, it is a hidden cost and the buyer with the help of his or her broker should always remember to include this when estimating closing costs."
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