Legal Question in Business Law in Arkansas

Unpaid sales tax by previous business owner

We recently bought a business and it subsequently triggered a tax audit of the previous owner by the state. The auditor found that the previous owner underpaid his taxes by more than $30,000.00. According to the sales contract that we have with the previous owner, he is liable for any unpaid debts that might arise, however, he told the auditor that he does not believe that he is liable and that he will never pay the debt. The auditor told us that if he does not pay, than we will have to pay it or risk penalties, fees, and possibly losing our business license. The previous owner currently leases space from us to conduct another business. Is it possible to have any of his property ''locked up'' and held as collateral until he resolves this with the state to protect us from the liability?


Asked on 7/31/03, 11:12 pm

1 Answer from Attorneys
Alan Crone Crone & McEvoy, PLC

Re: Unpaid sales tax by previous business owner

The simple answer is no under the circumstances you describe without some court order. You have a number of options both practical and legal.

Assuming there is no problem with the wording of the contract, if the State comes after you; you can haul him into the fray and force him to pay the taxes and any interest and penalties. At all costs you want to stay on good terms with the State because as the new owner of the busiess you are at risk for actions taken by them.

You should have an attorney advise you about this. Your attorney should review all of the documents surrounding the sale of the business including the contract and plan a strategy to solve this problem.

If I can be of more assistance to you, please do not hesitate to contact me at 1.880.403.7868 or [email protected].

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Answered on 8/01/03, 10:59 am


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