What is Bulk Sales and should I be worried?
In the State of New Jersey, the Division of Taxation is responsible for auditing tax assessments against businesses. A “Bulk Sale” is the sale of business assets, in whole or in part, outside of the ordinary course of business, which could include real property. Indeed, your multi-family home would be, in many cases, considered “income-producing” if you rent out the units.
While there are certainly exceptions, a Bulk Sales audit could apply if you are looking to purchase property that produces business income - for instance, rental income in residential purchases. Applying for an audit is critical in protecting buyers of business income producing properties because it can protect buyers from becoming liable for seller taxes. The New Jersey Division of Taxation must be timely notified so it can collect taxes from the appropriate party. Such bulk sale assets include real estate, goodwill, and tangible property such as inventory or materials. Remember, this must be outside the normal scope of the business. A business is defined by the New Jersey Division of Taxation as anything which generates revenue or realizes consideration for the purpose of generating profit or loss.
The Division will assert liability against the Owner of the property, not necessarily the Seller who may be the party having incurred the debt due. This means the Division can put a lien against your home for unpaid taxes from someone else. To avoid the headaches of having to prove these are not yours, or having to chase down the prior owner and having them pay the debt, you should be proactive and file the completed c9600 form, used for Bulk Sale applications, with the New Jersey Division of Taxation to request an audit and release letter at least 10 days prior to closing. In fact, it is the purchaser’s responsibility to notify the New Jersey Division of Taxation of a potential Bulk Sale. Even if the seller submits the bulk sale notification, this does not protect the purchaser.
Once the application is submitted to the New Jersey Division of Taxation Bulk Sales Division, an audit is undertaken and one of several letters may be issued. If liability is asserted, I will work to ensure that an adequate escrow is held back from the seller proceeds and your interests are adequately protected.
If you are looking for a real estate attorney in New Jersey, you can email me at Ranalli@ranalli-law.com. Your rights and privacy are 100% protected. We never share or sell your information or email. No one wants spam email and I respect your right to privacy. I am here to help you.
