Right now, we are seeing a lot of deal activity. 2018 was the third busiest year ever for mergers and acquisitions (“M&A”), with more than $3.8 trillion in announced deals.1 While worldwide deal-making is down somewhat overall so far in 2019, deal volume is up 2% from the same period last year in North America, with approximately $470 billion of announced deals in the first quarter.2 While the deal market remains hot, the non-state and local tax (“SALT”) folks running the deals at your company may not be aware of the various potential SALT issues that need to be considered. It is critical that they be made aware of the importance of involving SALT people early and often. With that in mind, we review some often overlooked but important SALT considerations that need to be addressed when your company is buying, selling or restructuring.


When the stock of a corporation is acquired, the corporation will generally continue to be liable for its previously existing tax liabilities. Therefore, stock-deal buyers generally ensure that appropriate language is included in the purchase agreement to protect against buying unknown or concealed liabilities. The unwise think asset deals leave them with no worries.

It is equally important for an asset buyer to protect itself against the historic SALT liabilities of a target. Note that buyers of partnership and LLC interests are deemed asset buyers for federal income tax purposes.3 Moreover, for asset deals, states do not typically follow the federal income tax rule that there is no successor liability for a buyer unless the transfer constituted a fraudulent conveyance under state law.4 State successor liability statutes typically apply more broadly, do not require a fraudulent conveyance in order for successor liability to apply and may apply to more taxes than just sales and use taxes. State liabilities can be for all taxes.5 Just because you found the sales and use tax bulk sale law does not mean that you found all the tax bulk sale laws in the state. The laws can be contained in other tax statutes.6


1 Dana Mattioli et. al., A Big Year for Deals – and Deal Makers, Wall St. J. (Dec. 30, 2018, 6:17 PM), https://www.wsj.com/articles/a-big-year-for-dealsand-deal-makers-11546185622.

2 Cara Lombardo & Ben Dummett, Global Deal-Making Gets Off to a Slow Start in 2019, Wall St. J. (Mar. 30, 2019, 7:00 AM), https://www.wsj.com/articles/global-deal-makinggets-off-to-a-slow-start-in-2019-11553943601?mod=searchresults&page=1&pos=3.

3 McCauslen v. Comm’r, 45 T.C. 588, 592 (T.C. 1966).

4 Diebold Found., Inc. v. Comm’r, 736 F.3d 172, 184 (2d Cir. 2013).

5 See, e.g., N.J. Stat. Ann. § 54:50-38.

6 For example, Illinois’ bulk sales law for sales and use tax can be found in the Retailers’ Occupation Tax Act (35 Ill. Comp. Stat. 120/1-120/14). However, Illinois’ bulk sales law for income tax is found in Article 9 of the Illinois Income Tax Act (35 Ill. Comp. Stat. 5/901-5/918).

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Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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