On March 3, 2017, the Department assessed the Taxpayer as a successor in business in the amount of $558,243.36 in tax, penalty and interest. On March 27, 2017, the Taxpayer filed a formal protest of the assessment. The main issue to be decided in this protest was whether the Taxpayer was a successor in business to American Car and Truck Care, LLC, and if so, to what extent was the Taxpayer liable for the amount owed. Shortly after incorporating in 2017, the Taxpayer engaged in series of actions that made the Department conclude that it was a successor in business. The Department relied on the statute and regulation that determines when one business becomes the successor to another. The Taxpayer argued that the regulation being used was unconstitutional. In response, the Hearing Officer cited the law that the Department has the authority to issues regulations that clarify and exemplify the statutes to which they pertain. The regulation lists various criteria that should be weighed when determining whether an entity is a successor in business to another and would, therefore, be responsible for any outstanding tax liability. The Taxpayer met the vast majority of these criteria. The Taxpayer’s business was engaged in exactly the same type of business, car maintenance and repair, as the LLC. It kept the same name as the LLC. It paid for the LLC’s accounts receivable. It leased the same building that the LLC was using for its business and even kept the same sign on the building as the LLC. The Taxpayer later acknowledged it was benefiting from the goodwill of the earlier business and was already a recognized name in the community. The Taxpayer had also continued the work of a contract that had been entered into by the LLC. All this suggested that the Taxpayer was a continuation of the LLC’s business. Two of the criteria listed in the regulation the Taxpayer did not meet. There was not enough evidence to support that the same officers of the previous business were now employed or connected with the Taxpayer. There was no evidence that the Taxpayer had taken on any of the debts of the LLC. But considering all of this evidence together convinced the Hearing Officer that the Taxpayer was a successor in business. The Taxpayer also argued the extent of the liability, suggesting that it should only be $10,000 for the goodwill and the amount paid for the accounts receivable. But the Hearing Officer found that this did not reflect the value of the property being used. This amount was the full amount of the assessment. This having been decided, the Hearing Officer ordered the assessment be paid and the protest denied.
Potter Endustries Inc