2023 Indiana Code › Title 6. Taxation › Article 8.1. Department of State Revenue; Tax Administration › Chapter 10. Penalties and Interest › 6-8.1-10-9.5. Successor Liability for Certain Unpaid Taxes; Notice; Procedure

Effective 1-1-2024.
Sec. 9.5. (a) As used in this section, the following terms have the following meanings:
(1) "Successor in liability" means a person that directly or indirectly purchases, acquires, is gifted, or succeeds to ownership of more than one-half (1/2) of all tangible personal property of a business, by value, including inventory, at all locations combined, as measured by the value of the property at the time of the transfer. "Successor in liability" does not include a personal representative or beneficiary of an estate, a trustee in bankruptcy, a debtor in possession, a receiver, a secured party, a mortgagee, an assignee of rents, or any other lienholder. A person shall only be considered a successor in liability to the extent that:
(A) a department lien or liens exist on tangible personal property transferred to the person;
(B) all tax due by the transferring business to the extent that notice was not provided to the department as required by subsection (b); or
(C) any tax due was included in the summary mailed to the successor in liability by the department pursuant to subsection (c).
(2) "Purchase price" means the consideration paid or to be paid by the successor in liability to the transferring business for the transfer of tangible personal property. "Purchase price" also includes debts assumed or forgiven by the successor in liability, or real or personal property conveyed or to be conveyed by the successor in liability to the transferring business.
(3) "Arm's-length transaction" means a transfer for adequate consideration between independent parties both acting in their own best interests. If the parties are related to each other, a rebuttable presumption arises that the transaction is not at arm's length.
(4) "Transfer" means every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with a business or an interest in a business, or a stock of goods, whether by gift or for consideration. "Transfer" includes a change in the type of business entity or the name of the business, where one (1) business is discontinued and a new business is started. "Transfer" also includes the acquisition by a new corporation of the assets of a prior business in exchange for the stock of the new corporation. "Transfer" does not include an assignment for the benefit of creditors, foreclosure or enforcement of a mortgage, assignment of rents, security interest or lien, sale or disposition in a bankruptcy proceeding, or sale or disposition by a receiver.
(5) "Transfer in bulk" means a transfer, other than in the ordinary course of the transferor's trade or business, of more than one-half (1/2) of all the tangible personal property of a business, by value, including inventory, at all locations combined, as measured by the value of the property at the time of the transfer.
(6) "Tax" means the gross retail tax imposed by IC 6-2.5-2-1, the use tax imposed by IC 6-2.5-3-2, and any county innkeepers tax or food and beverage tax imposed by IC 6-9.
(7) "Good cause" means the inability to comply with the statutory requirements of this section due to force majeure, fraud, failure of delivery by a carrier, or similar circumstances beyond the control of the successor. Lack of knowledge by the successor in liability of the requirements of this section shall not be considered good cause. Failure of a transferee or third party to provide the notice required by subsection (b) pursuant to a contractual obligation or informal understanding shall not be considered to be good cause.
(b) Whenever a business engages in a transfer in bulk, at least forty-five (45) days before taking possession of the assets or paying the purchase price, the potential successor in liability or the transferring business shall notify the department of the transfer and the terms and conditions related to the transfer on a form prescribed by the department. The notice must include the tax identification number of the transferring business and the potential successor in liability.
(c) The following apply:
(1) If the notice is not provided to the department as required in subsection (b), the potential successor in liability becomes the successor in liability and becomes liable for any unpaid taxes, interest, and penalties due from the transferring business to the extent of the purchase price.
(2) If the notice is provided as required in subsection (b) and, within twenty (20) days after receipt of the notice, the department places a summary in the United States mail addressed to the successor in liability specifying that tax liabilities exist in addition to those subject to a department lien or there are tax returns due but not filed, the successor in liability is liable for all taxes, interest, and penalties as stated in the department's summary to the extent of the purchase price if the successor in liability pays the purchase price or takes possession of the assets without withholding and remitting the liability to the department. The successor in liability is liable whether the purchase price is paid or the assets are transferred prior to or after notification from the department.
(3) If the department does not find any tax is due from the transferring business or that the transferring business has failed to file any returns that are due, the department must place a tax clearance letter in the United States mail addressed to the potential successor in liability within twenty (20) days after receipt of the notice required by subsection (b) specifying that no tax liabilities exist and that the transferee is not a successor in liability. The department shall issue the tax clearance letter even if the department determines that the transfer at issue does not constitute a transfer in bulk pursuant to subsection (a).
(d) If, based upon the information available, the department determines that a transfer in bulk was not at arm's length or was a gift, the successor's liability under this section equals the value of the tangible personal property transferred. Upon such a determination, the department may require that the successor in liability provide a third party valuation of the tangible personal property transferred.
(e) In the case of a gift resulting in successor liability under this section, the return of the gifted property by the donee to the donor releases the donee's successor liability.
(f) A potential successor in liability that complies with the requirements of subsections (b) and (c) is not liable for any assessments of taxes of the transferring business made after the department provides a summary to the potential successor in liability under subsection (c), except for taxes assessed on returns filed to comply with the summary. If the department fails to place the required summary in the United States mail within the twenty (20) day period, the potential successor in liability is not liable for any taxes of the transferring business, except with regard to transfers subject to subsection (d), if the purchase price is paid and the potential successor in liability takes possession of the assets within sixty (60) days of the mailing date the notice required pursuant to subsection (b). If the purchase price is not paid or the potential successor in liability does not take possession of the assets within sixty (60) days of the mailing date of the notice required pursuant to subsection (b), the potential successor in liability or the transferring business must submit a new notice pursuant to subsection (b).
(g) If the required notice under subsection (b) is not filed or any tax liability included in a summary mailed by the department pursuant to subsection (c)(2) remains due after the purchase price is paid or the successor in liability takes possession of the assets, the department must issue a notice of proposed assessment to the successor in liability for any such tax due.
(h) A successor in liability may protest the underlying tax unless the transferring business has already exhausted its protest rights with regard to the underlying tax. A successor in liability may also protest whether they qualify as a successor in liability with regard to the tax. In addition, the successor in liability may protest by submitting evidence showing good cause for not submitting the required notice or completing the purchase before receiving a clearance letter from the department. In the event that the transferring business has protested any taxes identified in the department's notice mailed pursuant to subsection (c)(2), the potential successor in liability shall not be considered a successor in liability with respect to such taxes if the potential successor in liability places an amount in escrow sufficient to satisfy such taxes pending resolution of the transferring business's administrative and legal process protesting such taxes.
(i) A transfer in bulk shall not constitute a retail transaction except for any inventory, motor vehicles, watercraft, aircraft, or rental property transferred.
(j) A transferor in bulk and any responsible officer thereof shall not be relieved of liability for any tax, interest, or penalties when a successor in interest also becomes liable for the tax, interest, and penalties. No owner, shareholder, director, officer, or employee of a successor in liability shall be considered to be a responsible officer relative to any tax, interest or penalties owed by the purchaser as a successor.
(k) The department has discretion in assessing and collecting the tax due from any liable party, but the department cannot collect more than the total tax, interest, and penalties imposed. The ability of the department to impose collections fees on the liable parties as otherwise allowed by this article shall not be impacted by this section.
As added by P.L.194-2023, SEC.33.