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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28953
Experience:  Taxes, Immigration, Labor Relations
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I received a notice that the Ca. State Board of Equalization

Customer Question

I received a notice that the Ca. State Board of Equalization was auditing a restaurant that I sold 1/1/2013 . The new owners apparently never notified them of the change of ownership so my name is ***** ***** file.
I called the agent and told him that I Had sold it and told him I had already sent proof of the sale to another person in his office. He e-mailed me back and again asked for records
that I do not have and have no possible way of obtaining as I have not owned the restaurant for the past 27 months. Now they are asking for my 2013 and 2014 personal
tax returns which have nothing to do with the restaurant as I sold it 1/1/2013.
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
Hi and welcome to our site!
The issue is that you should not close your business without notifying BOE and close out your seller’s permit...
You can use the BOE-65, Notice of Close Out for Seller’s Permit, to notify.
http://www.boe.ca.gov/pdf/boe65.pdf
If you simply allowed the buyer to use your seller’s permit - you might be held responsible.
Because the BOE contacted you - I guess they were not notified.
.
Even though you have closed out your seller’s permit, you must still report your sales up to the closeout date. This includes any sales of fixtures or equipment that occurred as part of the closure or sale of your business. You must also report any inventory you intend to retain for your own use if that inventory was purchased without payment of sales tax.
To help expedite the closeout you should separately report and identify the sale of “fixtures and equipment” and “retained inventory” on your final sales and use tax return.
Sales of inventory to another retailer or to the purchaser of your business are not taxable, but should be reported as “Sales to Other Retailers for the Purpose of Resale” on your return. A resale certificate should be obtained from the buyer and saved with your records.
See following publication for reference
http://www.boe.ca.gov/pdf/pub74.pdf
.
In additional - you should report the sale transaction on your personal income tax return - that is why BOE agent is asking for that information - to confirm that the business was sold.
Both the buyer and seller involved in the sale of business assets must report to the IRS the allocation of the sales price among section 197 intangibles and the other business assets. Use Form 8594, Asset Acquisition Statement Under Section 1060, to provide this information. The buyer and seller should each attach Form 8594 to their federal income tax return for the year in which the sale occurred.
Seller's taxable income is calculated for each asset = (selling price) - (basis); If the asset was purchased - the basis is its purchase price; The basis should be adjusted by any improvement expenses and depreciation.
Here is the form
http://www.irs.gov/pub/irs-access/f8594_accessible.pdf
and instructions
http://www.irs.gov/pub/irs-pdf/i8594.pdf
.
So far - taxing authorities will verify following
-- if you closed out your seller’s permit
-- if you filed your final sales tax return - and correctly reported sales tax due
-- if you charges sales tax when inventory were sold to the buyer - and if not - did you retain buyers seller's permit
-- if you reported the sale transaction on your personal tax return.
-- if you realized any gain from the sale of your business - did you included that gain into your personal taxable income.
.
If there are some items you did not do - I suggest to consult with a local CPA and you might need someone representing you with BOE.
Sorry for your situation.
If you still have any doubts, need clarification - please be sure to ask.
I am here to help you will all tax related issues.