Q&A with the Pennsylvania Department of Revenue

Scenario: In 2008, GHI Corp., a DE corp., acquired all stock of JKL Corp. In 2009, JKL Corp. is merged into GHI Corp. JKL Corp. never obtained a corporate clearance.

Jul 21, 2015
Scenario:

In 2008, GHI Corp., a DE corp., acquired all the stock of JKL Corp. In 2009, JKL Corp. is merged into GHI Corp. JKL Corp. never obtained a corporate clearance its merger into GHI Corp.

Since 2006, JKL Corp. employed an individual who worked out of her home in PA and solicited sales of tangible personal property in PA. JKL Corp. provided the individual with a car, laptop computer, equipment for her home office, display racks to be provided to customers and inventory used as samples.

JKL Corp. never (1) filed Foreign Franchise Tax returns (2) collected and remitted PA SUT (3) withheld PIT on wages of the PA employee. In addition, JKL Corp. never provided GHI Corp. with a Corporate Clearance. (JKL Corp. never qualified to do business in PA with the Dept. of State).

Prior to the merger, GHI Corp. did not do business in PA. After the merger, GHI Corp. began (1) to file Foreign Franchise Tax reports (2) to collect and remit PA SUT and (3) withhold and remit PIT.

In 2010, the Department of Revenue ascertained that JKL Corp. was (1) subject to PIT withholding on the wages of the individual (2) required to collect and remit PA SUT and (3) subject for the Franchise Tax and issued three assessments.

Q:

Under what circumstances, if any, would the former officers of JKL Corp. be liable for JKL Corp.’s tax liabilities and the extent of any personal liability?

A:

There is no bulk transfer liability. If there are unpaid trust fund taxes, the Department can issue responsible party assessments against those persons (officers, etc.) for the payment of these taxes. Also, if there are unpaid trust fund taxes, the Department can pursue all persons (officers, shareholders, third parties) receiving these funds.
Depending on the facts and circumstances, there could be some common law actions which the Department could pursue against the officers and shareholders.

Q:

Under what circumstances, if any, would GHI Corp. be liable for JKL Corp.’s tax liabilities and the extent GHI Corp.’s liability?

A:

As the survivor of the merger with JKL Corporation GHI Corporation is liable for every one of the JKL Corporation’s tax deficiencies (delinquent tax returns, delinquent taxes, etc.).

Q:

Would the answer to (a) and/or (b) be different if JKL Corp. had obtained a corporate clearance certificate?

A:

Assuming GHI Corporation will continue to operate in PA after its merger with JKL Corporation, JKL Corporation was not required to file for a merger clearance. GHI Corporation will liable for JKL Corporation’s tax obligations by operation of law.

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These documents provide a summary of the answers provided by the Department of Revenue to the PICPA Committee on State Taxation at its annual question and answer session. These documents are classified as revenue information issued for informational purposes only for the convenience of PICPA members. Pursuant to 61 Pa. Code Section 3.4, these documents should not be relied upon for any purpose or used in tax appeals. Taxpayers requiring a binding opinion on their specific fact situation may request a written letter ruling under 61 Pa. Code Section 3.3.