Certificates of No Tax Due are requested by parties to the sale of a business with Texas tax obligations to eliminate the need for withholding of a portion of the purchase price to cover the tax obligations and to prevent successor liability with regard to those obligations. Under Section 111.020(a) of the Texas Tax Code, a purchaser must withhold from the purchase price an amount which would be sufficient to pay the seller’s Texas tax obligations unless the seller furnishes to the purchaser a receipt for the payment of any taxes due or a certificate which confirms that no amount is due. Section 111.020(b) of the Texas Tax Code imposes liability for a seller’s Texas tax obligations on a purchaser who fails to withhold as required. Fortunately for purchasers, Section 111.020(c) of the Texas Tax Code allows purchasers to protect themselves by requesting the Certificate of No Tax Due.
Previously, Section 111.020(c) permitted purchasers to make this request but did not describe how the request should be made, hence the informal emails often used by parties to a transaction. Senate Bill 873, which became effective on September 1, 2021, added language to Section 111.020(c) of the Texas Tax Code specifying that the purchaser make its request “on an affidavit or other form prescribed by the comptroller.” As a result of the recent addition to Section 111.020(c), the Texas Comptroller has introduced Form 86-114 Joint Request for Certificate of No Tax Due.
As the name of the form states, the request for a Certificate of No Tax Due must now be submitted jointly by the parties to a transaction. The form requires basic information from both the purchaser and seller and must be signed by an authorized representative of each party. A copy of the form can be found here.
Historically, the Comptroller’s office has been quick in responding to requests for Certificates of No Tax Due, and one would expect the process to become even more efficient with the introduction of Form 86-114. Nevertheless, it is important for purchasers and sellers to submit the form well in advance of closing to allow time to address any outstanding tax liabilities which may be identified by the Comptroller in connection with the parties’ request.
For questions regarding this article or any transactional matter, please contact Kristen M. Cox at 214-749-2403 or firstname.lastname@example.org.