Avoiding Sales Tax Problems in Forming a Corporation or Other Entity

Peter Faber wrote this bylined article to examine the incorporation of an ongoing business and the transfer of assets of an unincorporated entity that could have sales tax liabilities unless they are specifically exempted. “States typically have an exemption from the sales tax for some types of transfers to a corporation or partnership (or limited liability company) in exchange for an equity interest,” Mr. Faber wrote. “The scope of the exemption varies considerably, however, and in many cases the statutory language is poorly drafted and covers too few or too many transactions.”