In an article for Bloomberg Tax published Thursday, October 31, 2019, Senior Counsel Jennifer Weidler Karpchuk discusses the effects of the U.S. Supreme Court’s decision in Wayfair and the sales tax liability issues that need to be on an M&A due diligence checklist.
“While some constitutional limits still apply to a state’s ability to impose its taxes upon out-of-state companies, there is no bright line rule that taxpayers can rely upon,” emphasizes Karpchuk. “This particularly becomes an issue in the realm of mergers and acquisitions, heightening the discrepancy between liability assessments between buyers and sellers – with some buyers wishing to be overly cautious, thereby driving up their calculation of contingent liabilities.”
Karpchuk outlines the following key issues affecting mergers and acquisitions post-Wayfair: ensuring there are no unpaid taxes of a target corporation; keeping an eye out for any issues or potential issues with trust fund taxes of a target corporation; ensuring target corporation’s compliance with states’ nexus laws, including pre-Wayfair; thoroughly evaluating potential income and gross receipt tax nexus and liabilities of a target company; and bearing in mind retroactivity in considering any funds that should be placed in escrow.
To read the full article, click here.