If you are thinking about buying a business in Washington state, there are local obligations that you should be aware of. While there are plenty of rules the federal government imposes on these types of transactions, Washington state has its own unique set of regulations, and you could owe much more in taxes if you are unaware of their requirements.
Real estate taxes
One of the most important tasks for the buyer of a business is to make sure all real estate taxes have been paid prior to the purchase. Under Washington state’s business transactions laws, you, as the buyer, could be responsible for all unpaid real estate taxes for the year if the seller does not pay them within 10 days of the sale.
How to avoid paying extra real estate taxes
To prevent paying more than your fair share of real estate taxes, it is important to obtain proof that the seller has indeed paid the taxes they owe prior to the business sale. You can do this by requesting that the seller provide a Tax Status letter from the Washington State Department of Revenue. This letter will let you know for certain that the taxes have been paid rather than relying on what the seller tells you. Additionally, this letter becomes part of the legal sales process and can protect you should there be any future confusion regarding the taxes.
What happens if you don’t get a tax status letter?
If you choose not to request the tax letter, the business law requires that you hold enough funds to pay what is due in case the seller has any unpaid real estate taxes. You will need to prove that you have these funds at closing.