Indiana Bulk Sale Tax Clearance: What Sellers File

What Changed in 2024

According to Taft Law, Indiana's bulk sale rule took effect on February 14, 2024. It changed who can end up paying a seller's unpaid state taxes after a business is sold.

Under the rule, a buyer can be held liable for the seller's unpaid sales tax and food and beverage tax unless the Department of Revenue gets notice of the sale ahead of time.

Buyers and their lenders know this. That means sellers who plan for it look organized, and sellers who don't can watch a closing date slide while everyone waits on the state.

When the Rule Applies

The rule applies when more than 50% of a business's tangible personal property changes hands in a sale. Tangible property includes things like equipment, vehicles, furniture and inventory.

Most sales of owner-run companies are asset sales, where the buyer takes over the equipment, inventory and goodwill. In those deals, the 50% line is usually crossed without anyone thinking about it.

The Department of Revenue's instructions list sales tax, use tax, food and beverage tax and county innkeeper's tax as the taxes involved. Restaurants and hotels should pay particular attention.

Stock sales and partial sales can work differently. If your deal is close to the 50% line or structured in an unusual way, ask your attorney whether the notice is needed.

What Gets Filed

The filing is called a Notice of Transfer in Bulk. It goes to the Indiana Department of Revenue and gives the state basic details about the seller, the buyer and the property being sold.

The Department's instructions say either the seller or the buyer may file it. In practice, the buyer's attorney often takes the lead, since the buyer carries the risk, but the seller has a part to play either way.

The notice can be filed online through INTIME, the Department's tax portal, or by mail. When it is filed online, the seller has to log in and approve the release of their tax information.

A mailed notice needs the seller's signed acknowledgment, and the Department says it won't process the request without it. Either way, your cooperation is part of the filing.

The Department also says a notice missing required information or documents is not considered submitted. A sloppy filing can quietly restart the clock.

The Timeline in Plain English

There are three numbers to remember. Taft Law and the Department's own instructions both describe them the same way:

1. The notice must be filed at least 45 days before the transfer, which in most deals means before closing.
2. The Department replies within 20 days after it receives the notice.
3. A clearance letter, once issued, is good for 60 days.

Put together, that gives you a window. File early enough to get the 45 days in, then close within 60 days of the clearance letter so it is still valid on closing day.

If the deal stalls past that 60-day window, the parties may need to go back to the Department before closing. That is one more reason to file once the deal is firm, not months too early.

What the State Sends Back

According to the Department's instructions, the reply goes to both the buyer and the seller. It comes in one of two forms.

• A tax clearance letter, if the seller has no outstanding tax liabilities or past due returns
• A tax summary, if there are unpaid taxes or missing returns that need attention

A clearance letter is what everyone hopes for. It tells the buyer the state isn't looking to them for the seller's past sales and food and beverage taxes.

A tax summary isn't the end of the deal. It means something has to be resolved first, usually by filing missing returns or paying what's owed, often out of the sale proceeds at closing.

What Happens Without It

If the notice isn't filed on time, the Department's instructions say the buyer may become liable for the seller's unpaid taxes, including penalties and interest, up to the purchase price or the value of the property.

The same instructions say that if the sale closes before a clearance letter arrives, the buyer may also become liable for taxes the Department later finds were owed.

Because of that risk, most buyers and lenders will insist on the notice. A buyer who skips it may ask for a holdback, a bigger escrow or a stronger promise from you to cover any old taxes.

The rule puts the legal risk on the buyer, but the practical cost often lands on the seller. Expect it to shape the purchase agreement either way.

How Sellers Can Prepare

The best thing you can do is make sure the state has nothing to report. A few steps months before a sale make the clearance step routine:

• Confirm every sales tax return has been filed and paid on time
• Check your INTIME account for notices or balances you may have missed
• Clear up any old food and beverage or use tax questions with your accountant
• Keep copies of recent returns ready for the buyer's diligence team
• Tell your attorney and broker early that the notice will be needed

If you're early in the process, exit planning is a good time to clean up tax filings, before any buyer is looking at them.

Where It Fits in the Sale

The notice usually gets filed after the letter of intent is signed and the purchase price and closing date are taking shape. It then runs alongside due diligence and lender approval.

Since diligence and financing often take longer than 45 days anyway, the notice rarely has to slow a deal down. Problems come when nobody files until the last few weeks.

Our guide on how long it takes to sell a business shows where this step lands in a typical schedule.

Confirm With Your CPA or Attorney

This page is a general overview, not legal or tax advice. Rules, forms and Department procedures can change, and how they apply depends on the details of your deal.

Before you close, confirm the filing requirement, timing and any open tax items with an Indiana CPA or business attorney. They can also check whether other state or local filings apply.

Getting Started

The bulk sale step is one of many details in a well-run sale. If you're thinking about selling, start with a free, confidential valuation.

Or call (317) 555-0186 to talk with someone about your timeline and what a sale could look like for your company.