Ezel / Tax Rulings / TX
TX 8802L0892C12 Sales and/or Use Tax (State,Local,MTA) 1988-02-04

Did a company incur successor liability for another business's Texas sales tax when a proposed purchase was terminated and no consideration was paid?

Short answer: No. Because the purchase agreement ended and the prospective buyer paid no consideration for the business or stock of goods, it should not have successor liability for the seller's sales tax.

Apply this to your situation

This page answers the general question as of 1988. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1988
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official February 4, 1988 Texas Comptroller of Public Accounts letter concerning one failed business purchase, published on STAR. Its conclusion depends on termination of the agreement and no consideration being paid to or for the seller; different acquisition facts can create successor liability. Verify current clearance and successor-liability law before relying on it today. Letters on STAR can support detrimental reliance only for the taxpayer directly issued the letter and may no longer represent current policy. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

A prospective buyer considered buying another company's assets but terminated the purchase agreement after the seller failed to satisfy its conditions.

The buyer paid no consideration to or on behalf of the seller for the business or stock of goods. The Comptroller therefore said the buyer should not have successor liability for the seller's unpaid sales taxes.

What this means for you

The result turned on the transaction not closing and no consideration being transferred. The letter does not establish that every failed or restructured asset purchase avoids successor liability.

Common questions

Did the buyer acquire the business? No.

Did it pay consideration? No.

Was it liable for the seller's sales tax? The letter said it should not be.

Citations and references

The letter did not cite a rule or statute by number.

Source

Original ruling text

February 4, 1988

Re: ***

Dear ***:

Thank you for your recent letter requesting clarification of liability incurred by purchase
of a business.

In this letter you ask whether your client, CORP A, may purchase the assets of CORP B.
CORP A should not be held liable for sales taxes owed by CORP B since CORP A is not paying
any consideration to or on behalf of CORP B for the business or stock of goods.

The letter of agreement to purchase CORP B was terminated by your client due to CORP B's
having failed to satisfactorily meet the conditions of this agreement. Your client paid no
consideration to CORP B as a result of the agreement to purchase and should have no successor
liability for sales taxes owed by CORP B.

This opinion is based on the facts presented. If there are additional or different facts,
the opinion may change.

You may write me at the Tax Policy Division.

Sincerely,

Tax Policy Division

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