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Maryland Tax Amnesty Program Slowly Winding Down...

10/7/2015

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​Earlier this year the Maryland General Assembly passed House Bill 1233, appropriately titled the Tax Amnesty Program (the “Amnesty Program”), which provides certain delinquent Maryland taxpayers with generous tax amnesty. Maryland’s Amnesty Program began on September 1, 2015 and runs until October 30, 2015. Under the Amnesty Program, the Maryland Comptroller will (1) waive all civil tax penalties and (2) waive one-half of the interest that will have accrued against a taxpayer who failed to report taxes, failed to pay taxes, or simply underreported a tax liability.

While the window provided to taxpayers who want to take advantage of the program is relatively short, the type of taxpayers that the program is offered to is quite broad. The Amnesty Program is applicable to taxpayers who have nonpayment, nonreporting, or underreporting issues that stem from individual income tax, corporate income tax, withholding tax, sales & use tax, and admissions & amusement tax. Additionally, a unique aspect of Maryland’s Amnesty Program is that, unlike most other states’ tax amnesty programs, there is no language contained within the text of the Amnesty Program that limits or excludes taxpayers who are already under audit, have assessment appeals pending before the state taxing authority, or who have already been identified by Maryland’s taxing authority as potentially delinquent taxpayers.

The Amnesty Program generally requires a delinquent taxpayer to pay the tax owed during the amnesty period (by October 30, 2015). Maryland’s Amnesty Program, however, explicitly provides the Comptroller with the ability to allow such a taxpayer to enter into an agreement to pay such delinquent taxes over an extended period of time. Accordingly, Maryland taxpayers who are potentially or definitely delinquent with regards to their Maryland tax liability – regardless if such liability stems from individual, corporate, withholding, sales & use, or admissions & amusement tax – would be well-advised to take advantage of the Amnesty Program before it expires at the end of the month on October 30, 2015.
For questions or assistance in applying for the Maryland Tax Amnesty Program, please contact us at (703)-595-2836 or admin@bjkanglaw.com

1.Tax Amnesty Program, MD Gen. Assembly, HB 1233 / SB 763 (2015).
2.MD Gen. Assembly, HB 1233 § 2(a)(1)(i) and (ii) (2015).
3.See MD Gen. Assembly, HB 1233 (2015).
4.MD Gen. Assembly, HB 1233 § 2(a)(2)(i) (2015).

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Are you planning to buy a business in Maryland?

10/2/2015

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Unbeknownst to most buyers and sellers of businesses in Maryland (as well as New York and a handful of other states), MD law requires the buyer and seller of all or a substantial amount of a business's assets, when the asset sale is “not in the ordinary course of the transferor’s business,” to: (1) comply with a list of notice requirements (not the subject of this article); and (2) pay a 6% sales and use tax on the price of tangible personal property that is sold as part of a sale of a business.

The Bulk Sales tax applies to a business’s tangible personal property, such as furniture and fixtures, business records and customer lists, computer software, and non-capitalized goods and supplies. The Bulk Sales tax does not apply to a business’s real or intangible assets, most importantly intellectual property, goodwill, cash, or accounts receivable, and it does not apply to a business’s inventory as such inventory will be subject to Maryland sales and use tax when it is eventually sold to the business’s customers.

Consequently, this 6% sales and use tax can, unfortunately, be quite costly and often comes as a surprise to the buyers and sellers of a business. Buyers of business tax when a business sale is structured as an asset sale, as opposed to a sale of a business’s stock or eqsses, rightfully so, generally favor structuring the purchase and sale of a business as an asset sale. These buyers receive a stepped-up tax basis in the assets they purchase, avoid hidden liabilities and legal exposure that attach with simply purchasing an existing business’s equity, and are able to amortize goodwill. However, as we see time-and-time again, these same buyers (and sellers) frequently overlook the sales and use tax implications that specifically result from structuring the transaction as an asset sale.

Simply having knowledge of the existence of this additional 6uity, can be quite beneficial for both parties. With such knowledge and foresight of the impending Bulk Sales tax, the buyer and seller can avoid penalties and interest that arise from not paying the tax, can arrange and negotiate how to allocate the sales tax into the purchase price of the business assets, and can ultimately determine if it would be more beneficial to structure the purchase and sale of a business in a different manner.

For questions regarding the Bulk Sales Tax, please contact us at (703)-595-2836 or admin@bjkanglaw.com

MD Comm. Law § 6-102(1).
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    Authors


    ​B.J. Kang JD, CPA
    Josh Portman JD, LL.M
    Habeeb Syed JD
    Nora Ji Li LL.M
    Nathaniel S. Johnson

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