- Agency
- Kansas Department of Revenue, through its tax clearance request on the department website
- Paperwork
- A clearance letter showing your Kansas tax accounts are in good standing
- The clock
- Request it well before closing, since buyers and lenders often hold funds until it arrives
Watch for: Treating the letter as a release from every tax. It reflects your standing on the date issued, and later audits can still happen.
Why buyers ask for it
Kansas tax guidance warns that someone who buys a business can be responsible for tax debts the previous owner left behind. The state sales tax publication says that buying the total assets of a business also means buying its liabilities.
That is why buyers and their lenders want proof that your accounts are current before they fund. The letter is the standard way to show it.
Who requests it
The seller starts the request. The Department of Revenue explains that a buyer can be released from the previous owner's tax debts when the seller produces a clearance showing no taxes are due.
The request goes through the department's tax clearance page on its website. Ask your CPA to submit it so the account details match.
What the letter proves
A clearance letter says the business is in good standing with the Department of Revenue on the day it is issued. It does not promise that no tax will ever be assessed for earlier periods.
Read the wording on your letter and share it with your attorney. If the sale agreement relies on the letter, make sure it covers the accounts that matter, such as sales tax and withholding.
Fix problems before you ask
Missing returns, unpaid balances and stale filings can delay the letter. File anything overdue and pay or arrange payment first.
If you discover a balance during a sale, tell your broker early. Buyers handle a known issue better than a surprise in diligence.
Timing around closing
Closing dates slip, and a letter ages while you wait. Plan for the possibility of requesting a new one if the closing moves back by weeks.
Buyers sometimes hold back part of the price until the letter arrives. Starting early keeps that holdback small or unnecessary.
What goes in the agreement
- Who orders the letter and by what date
- What happens if the letter shows a balance
- Whether any holdback covers tax exposure after closing
- Who answers a state notice about periods before the sale
Related steps
Closing out your tax accounts after the sale is a separate task, covered in closing Kansas sales tax and withholding accounts. Employers should also read about the unemployment account transfer.
For a view of how taxes affect your net proceeds, see price allocation in an asset sale. To learn what your company might sell for, find your price range.
This page is general information and not tax or legal advice. Confirm the process and timing with your CPA, your attorney and the Kansas Department of Revenue.