Reply To: Hidden Liabilities

#115682


Participant

A huge one in my experience is sales and use tax. In the US, this liability falls on the company selling the products such that if they did not charge the customers any sales tax (generally because they did not know they were supposed to) then they ultimately become responsible to pay the state government this uncollected tax themselves. Why this can become such a large liability is because there is generally no statute-of-limitations (meaning the government can reach back 10+ years and impute this uncollected & unremitted tax, including penalties and interest, on all your past sales). As you might suspect, sometimes this quantified liability is too great for the organization to economically handle and it kills the pending M&A transaction and sometimes the entity itself.

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