Target companies frequently have unregistered nexus in states where they have been selling for years, and that exposure does not disappear at closing. It transfers to the buyer, along with all of the accumulated back tax, interest, and penalties that come with it. Buyers who identify this risk during diligence often negotiate indemnification provisions to address it. But indemnification alone is frequently not enough. Without additional contractual mechanics, a buyer can find

For companies that have grown quickly, expanded into new markets, or simply never gotten around to a formal nexus study, sales tax registration can feel like a routine, almost clerical task. A business decides it needs to register in a new state, fills out the online registration form, checks a few boxes, and receives a sales tax permit within days. But buried in nearly every state's registration application is a question that carries far more weight than its short answer fie

Unregistered tax exposure is an accounting problem before it is a controversy problem. A company that knows it has nexus and has not filed has a liability that must be evaluated for recognition and disclosure in its financial statements, and the applicable framework differs depending on the tax. Income Tax Exposure — ASC 740 State income and franchise tax positions fall within ASC 740, including the subtopic governing uncertain tax positions. A decision not to file a return i

A VDA is a negotiated agreement between a taxpayer and a state taxing authority under which the taxpayer comes forward before being contacted about an audit, discloses the previously unreported liability, pays the tax and (usually) interest for a defined period, and receives specified relief in return. Most states operate a formal VDA or voluntary compliance program; many allow the initial approach to be made anonymously through a representative, so the company's identity is