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WAC 216 Successors, quitting business.  
SOURCE DOCUMENT DETER. NO DATE OF ISSUE DESCRIPTION
       
WAC: 458-20-216   07/31/2005 Successors, quitting business.Effective 7/1/70.Updated 5/1/99. Update effective 7/31/05.
       
RCW: 82.04.180   1995 "Consumer."
  82.32.050   1996 Deficient tax or penalty payments--Notice--Interest--Limitations.
  82.32.140   1961 "Business."
  82.32.160   1989 Correction of tax--Administrative procedure--Conference--Determination by department.
  82.32.170   1967 Reduction of tax after payment--Petition--Conference--Determination by department.
  82.32.180   1985 "Successor."
       
ETA: 3087.2009 2/2/09 Bankruptcy liquidations: Retail sales and use tax
  545.08.216 10/6/89 BANKRUPTCY LIQUIDATIONS:  SALES AND USE TAX Revised 2/2/09 See ETA 3087.2009
       
INDUSTRY GUIDES:      
       
SPECIAL NOTICES:      
       
DIRECTIVE: None      
       
RPM: None      
       
WTD: 1 WTD 13 85-215A   SUCCESSORSHIP -- DEFACTO CORPORATION AS PREDECESSOR -- SUCCEEDING TO TAX LIABILITY.Purchasing a business from a corporation which has not registered with the Secretary of State does not defeat one's successorship liability if the taxpayer had knowledge that he was dealing with a corporation, defacto or otherwise. The taxpayer is estopped from asserting lack of capacity. American Radiator Co. v. Kinnear, 56 Wn. 210, 105 P. 630 (1909).
  1 WTD 13 85-215A   SUCCESSORSHIP -- DEFINITION -- OVERLY BROAD. The definition of successorship is not overly broad.It is a rational means of collecting taxes which might otherwise be uncollectible. Tri-Financial v. Dept. of Rev., 6 Wn. App. 637, 495 P.2d 690 (1972).
  2 WTD 53 86-304   SUCCESSORSHIP -- MERCHANDISE -- ACQUISITION.The acquisition of a predecessor's merchandise subjecting a taxpayer to successorship liability does not have to be by virtue of a direct conveyance or sale by that predecessor.
  2 WTD 53 86-304   SUCCESSORSHIP -- LANDLORD'S LIEN -- SUMMARY FORECLOSURE. Perishable and other products taken over and subsequently sold in accordance with the summary foreclosure provisions of Chapter 60.10 RCW pursuant to the taxpayer's landlord's lien for unpaid rent were properly "acquired through regular legal proceedings to enforce a lien" and did not operate to render the taxpayer a successor, despite the fact that the taxpayer, in selling the goods, was operating a similar business in the same location.Taxpayer had made enough changes in the business so as not to be confused with the prior tenant.
  2 WTD 53 86-304   SUCCESSORSHIP -- LANDLORD'S LIEN -- FORECLOSURE -- TIMING. The provisions of Rule 216 do not prohibit foreclosure action which would cure successorship from occurring after a Notice of Successorship Liability is issued.
  2 WTD 131 87-5   B&O TAX -- SUCCESSOR -- LIABILITY OF.The successor of a business is liable for excise taxes left unpaid by the former owner of the business as provided by RCW 82.32.140 and RCW 82.04.180.The successor liability provisions provide constitutionally valid means of collecting taxes.
  3 WTD 81 87-140   SUCCESSORSHIP. A "successor" is one who buys a major part of the equipment, supplies, merchandise, inventory, fixtures, or materials from a person who is quitting, selling out, or disposing of a business.
  5 WTD 277 88-171   SUCCESSORSHIP -- TRANSFEREE -- AFFILIATE -- SUCCESSOR -- WHAT CONSTITUTES. A taxpayer that liquidates its business and transfers its assets to an affiliate company creates successorship liability in the affiliate business.
  5 WTD 277 88-171   SUCCESSORSHIP -- LIABILITY. A successor is liable for the full amount of the previous owner's tax liability. A successor is not liable for the interest and/or penalties associated with the previous owner's tax liability.
  5 WTD 277 88-171   SUCCESSORSHIP -- NOTICE. A successor is not liable for the interest assessed in an audit of the business records of the previous owner.The successor is liable only for the tax assessed in the audit report.A taxpayer can raise its successorship status for the first time upon appeal, thereby exempting itself from any interest and/or penalties imposed against the previous owner.
  6 WTD 263 88-304   SUCCESSOR -- LIABILITY FOR TAX -- CONTRACT PROVISIONS -- "HOLD HARMLESS" CLAUSE. A successor is liable for the full amount of the previous owner's tax liability. A contract provision claiming to "hold harmless and defend purchasers against any and all claims.."is insufficient to avoid the successorship liability.
  6 WTD 285 88-313   EXCISE TAXES -- SUCCESSOR LIABILITY -- PROPERTY PEACEFULLY REPOSSESSED UNDER SECURITY AGREEMENT. Taxpayer is not liable as a successor if it merely takes possession of tangible personal property pursuant to a security agreement, nor is it liable if it operates the business temporarily as a means of liquidating the property repossessed. Where taxpayer operates the same type of business in the same location as its debtor, it is a successor by virtue of having succeeded to the business.THIS DETERMINATION HAS BEEN OVERRULED OR MODIFIED IN WHOLE OR PART BY DET.NO. 97-121, 17 WTD 64 (1998).
  7 WTD 19 88-399   SUCCESSOR LIABILITY: Landlord is a successor where he takes bill of sale, partly in satisfaction of past-due rent, for all equipment of tenant who has quit business several months prior to the sale and where tenant is now disposing of the assets of the business even though the landlord does not step in the operate a similar business or to continue tenant's business. However, liability will be limited to the value of the property acquired by the successor.
  10 WTD 51 90-257   EXCISE TAXES -- SUCCESSOR LIABILITY -- BONA FIDE PURCHASER OF ASSETS -- PARTIAL PAYMENT OF PREDECESSOR'S DEBTS. Taxpayer purchasing assets of a defunct business from the IRS does not become successor notwithstanding the fact that it pays certain dishonored checks or past-due obligations of the predecessor.
  10 WTD 173 90-377   SUCCESSORSHIP -- REGULAR LEGAL PROCEEDING TO ENFORCE A LIEN -- USC 6325 (b) (2) (A) -- "RELEASE OF LIEN OR DISCHARGE OF PROPERTY." The procedure to obtain a release of IRS lien on property under USC 6325 (b) (2) (A) is a "regular legal proceeding to enforce a lien."
  12 WTD 473 92-306   SUCCESSOR -- NOTICE. The Department is only barred from issuing an assessment of successorship liability if the successor has given written notice to the department of the acquisition of a business and no assessment is issued within six months of receipt of thesuccessor's notice.
  14 WTD 50 93-297   SUCCESSORSHIP -- MAJOR PART OF THE MATERIALS, SUPPLIES, MERCHANDISE, ETC. RCW 82.04.180 requires, among other things, that a taxpayer acquire a "major part of the materials, supplies, merchandise, inventory, fixtures, or equipment" of its predecessor, if the taxpayer is to be a "successor" as defined in that statute.
  16 WTD 79 96-073   RETAILING B&O TAX -- RETAIL SALES TAX -- USE TAX -- SUCCESSORSHIP -- NOTICE OF ASSESSMENT TO SUCCESSOR.After receiving written notice of acquisition from a successor, a notice of successorship from the Department of Revenue merely indicating liability resulting from purchasing the seller's business or assets, without mailing a copy of the seller's assessment within six months to the successor or, at least, a written notice stating an amount due, type of tax, and a payment due date, is not an assessment notice as required by RCW 82.32.140.Accord:Det. No. 92-306, 12 WTD 473 (1992); Allied Medical Associates, Inc. v. Department of Rev., BTA Docket No. 92-70 (1994)
  17 WTD 64 97-121   SUCCESSORSHIP -- ELEMENTS.The five elements of a statutorily defined successor are:(1) The successor must acquire from a taxpayer; (2) who is selling out, exchanging, or disposing of a business; (3) in bulk and not in the ordinary course of business; (4) by sale or conveyance; (5) a major part of the materials, supplies, merchandise, inventory, fixtures, or equipment of the delinquent taxpayer.
  17 WTD 64 97-121   SUCCESSORSHIP -- LANDLORD’S LIEN.The holder of landlord’s lien has the same rights as a secured creditor and is entitled to same defenses against an assessment of successorship liability.
  17 WTD 64 97-121   SUCCESSORSHIP -- ENFORCEMENT OF A LIEN--PEACEFUL REPOSSESSION.A secured party’s acquisition of property by “regular legal proceedings to enforce a lien” does not subjectit to successorship liability.Peaceful repossession qualifies as a regular legal proceeding.Acceptance of a bill of sale in satisfaction of a lien is a peaceful repossession.
  17 WTD 116 96-221   SUCCESSORSHIP -- ELEMENTS.The five elements of a statutorily defined successor are:(1) The successor must acquire from a taxpayer; (2) who is selling out, exchanging, or disposing of a business; (3) in bulk and not in the ordinary course of business; (4) by sale or conveyance; (5) a major part of the materials, supplies, merchandise, inventory, fixtures, or equipment of the delinquent taxpayer.
  17 WTD 116 96-221   SUCCESSORSHIP -- “STEP TRANSACTION DOCTRINE”.The Department may not collapse steps of a transaction to determine successorship.For example, the fact that a lessor repossesses property and immediately leases the property to a third party may not be treated as the acquisition of property from the previous lessee.
  17 WTD 116 96-221   SUCCESSORSHIP -- ELEMENTS -- OPERATION OF A SIMILAR BUSINESS.Whether a person operates a business similar to that of the alleged predecessor is irrelevant to a determination of successorship.
  17 WTD 116 96-221   SUCCESSORSHIP -- “MAJOR PART OF THE MATERIALS, SUPPLIES, INVENTORY, FIXTURES, OR EQUIPMENT.”The element of successorship requiring the acquisition of a "major part of the materials, supplies, inventory, fixtures, or equipment" refers to the tangible personal property of the alleged predecessor and does not include intangible property.
  20 WTD 15 99-278   MERGER -- LIABILITY OF SURVIVING CORPORATION FOR PENALTIES IMPOSED ON DISAPPEARING CORPORATION.The surviving corporation of a merger is not a successor corporation under the successor corporation statute and rule that limit a successor corporation to liability for taxes only because the disappearing corporation did not sell or convey the assets to the surviving corporation.The surviving corporation of a merger is liable for interest and penalties, as well as taxes, imposed on the disappearing corporation prior to the merger.Citing, Palmer v. Department of Revenue, 82 Wn.2d 367, 917 P.2d 1120 (1996); InQuest, Inc. v. State, BTA Docket No. 97-61 (October 28, 1998).
  20 WTD 490 01-144   COMMUNITY PROPERTY -JOINT DEBT - LIABILITY.A debt incurred by either spouse during marriage is presumed to be a community debt. The acid test to determine whether an obligation incurred by a spouse is a community debt is whether or not the transaction was intended for the benefit of the community or expectation of benefit for the community.
  20 WTD 490 01-144   TAX LIABILITY - DISSOLUTION DECREE - RELEASE FROM LIABILITY TO PAY. The court in a divorce action cannot adjudicate the rights of creditors who are not parties to the action. A Decree of Dissolution that required the husband to pay the liability owed to the Department of Revenue does not preclude the Department from seeking payment from the wife.
  22 WTD 22 01-019   82.32.140: SUCCESSORSHIP – EQUIPMENT – TRANSFER. When newly-acquired equipment was knowingly and intentionally placed in an existing corporation in order to take advantage of its limited liability and corporate insurance coverage pending the formation of a new corporation, passing only briefly through the names of the shareholders, the equipment was indirectly acquired by the newly-formed corporation, and its designation as a successor was justified.
  22 WTD 72 02-0184   RCW 23B.14.220:CORPORATION -- ADMINISTRATIVE DISSOLUTION -- REINSTATEMENT.A corporation that was administratively dissolved and subsequently reinstated by the secretary of state was a valid corporate entity for all periods after incorporation.The reinstatement related back to the time of dissolution.
  22 WTD 72 02-0184   CORPORATION -- ADMINISTRATIVE DISSOLUTION -- OFFICERS LIABLE AS PARTNERS.Corporate officers were not liable as partners for corporate debt where a valid corporate entity existed at the time the tax liabilities were incurred.
  26 WTD 27 05-0313   EXCISE TAXES – LIABILITY OF SUCCESSOR.Effective July 1, 2003, the legislature amended the definition of "successor" in RCW 82.04.180 for excise tax purposes to include a person who acquires fifty percent of the fair market value of either the tangible assets or intangible assets of a business.Hence the taxpayer is the successor of her predecessors, if: (1) they quit, sold out, exchanged, or disposed of their business; (2) they sold or otherwise conveyed, directly or indirectly; (3) in bulk and not in the ordinary course of their businesses; (4) more than fifty percent of the fair market value of either their (i) tangible assets or (ii) intangible assets; (5) to the taxpayer.
       
OTHER: