Buying a Restaurant in New York: Can You Inherit the Seller’s Sales Tax Bill?

Quick answer: Yes. In New York, buying a restaurant’s business assets from a seller who collects sales tax is a bulk sale, and that includes buying only the fixtures and equipment from a restaurant that’s closing. If you pay the seller without following the bulk-sale procedure, the Tax Department says you “may be held liable” for the seller’s unpaid sales and use taxes, up to the purchase price or the fair market value of the assets, whichever is higher. The procedure starts with Form AU-196.10, filed at least 10 days before you pay for or take possession of any of the assets, whichever happens first. Then you wait for the department’s answer before money moves.

This covers New York State sales and use tax for someone buying a restaurant’s assets. It isn’t New Jersey law, and it isn’t legal or tax advice for your deal. The Tax Department bulletin and forms cited here were read on October 19, 2026.

Does buying only the equipment count?

Yes. Tax Bulletin TB-ST-70 defines a bulk sale as the sale, transfer or assignment of business assets, in whole or in part, by a person required to collect sales tax. Business assets include equipment and other tangible property, real property and intangibles such as goodwill. One of the bulletin’s own examples is “a restaurant that is closing sells all of its fixtures and equipment to a person opening up a new restaurant.” Ordinary retail sales to customers don’t count.

Buying the company is handled differently. In the bulletin’s example, one corporation buys all the stock of another, both stay separate legal entities, and no business assets are transferred, so it isn’t a bulk sale. That only means the bulk-sale notice isn’t triggered. The bulletin doesn’t say the company you bought leaves its tax history behind, so a stock deal needs its own review with your lawyer and accountant. Our guide to buying an existing restaurant covers why buying equipment, buying business assets and buying a company are different transactions.

The clock runs from payment or possession, not the closing date

Form AU-196.10 (revised May 2026) says the buyer submits it at least 10 days before taking possession of or paying for the business or property, whichever comes first. That’s 10 days, not 10 business days. The form’s instructions say the “scheduled date of sale” you enter is the date you take possession or pay, whichever is first. So if the seller lets you into the space before closing, or the contract calls for money before closing, the earlier date may be the one that counts. Whether a deposit or early access counts as paying or taking possession in your deal is a question for your lawyer before either happens.

How you send it matters too. The form says registered mail. The bulletin also lists certified mail with return receipt and hand delivery to the department in Albany, and says any other method only counts from the day the department actually receives it, with the buyer responsible for proving receipt. If the closing date or another detail changes, the bulletin says to file a revised form marked “Revised.”

The seller is supposed to give you Form TP-153, a notice to prospective buyers. If they don’t, your obligations don’t go away. And the statute printed on the form says you have to notify the department whether or not the seller tells you it owes any tax.

What the department sends back

The bulletin says that within five business days of receiving your form, the department sends one of two things:

• Form AU-197.1, a release. The seller has no unpaid sales tax and no further review is needed. You won’t be held liable for the seller’s unpaid sales tax and can pay the full price at closing, subject to the lien warning below.
• Form AU-196.2, a notice of claim. The seller owes tax, is scheduled for a review or is under audit. Don’t pay the seller. The bulletin says to put the full purchase price in escrow. The department will tell you the amount due, if any, within 90 days of receiving your form. You pay that from escrow, up to the purchase price or the fair market value of the assets, whichever is greater, and the rest goes to the seller.

The bulletin also says that if the department doesn’t send a notice of claim within five business days of receiving a properly completed, timely form, you aren’t liable and can pay in full. Don’t count those days yourself and release the money. For that window, the department treats your form as received on the day it actually reaches the Bulk Sales Unit, but not earlier than 10 days before the scheduled or actual sale date, whichever is later. Have your lawyer confirm where you stand before anyone wires the balance.

A release doesn’t clear everything. The bulletin warns that whichever form you get, the assets can still be subject to the department’s liens if there are outstanding warrants or judgments against the seller for past unpaid taxes. That’s a separate search for your lawyer.

What the notice doesn’t handle

Your own sales tax registration. The seller’s Certificate of Authority isn’t transferable. If you’ll make taxable sales, you need your own, and the three sources describe the deadline differently. The bulletin says to apply at least 20 days before beginning business. Page 2 of Form AU-196.10 says a buyer who has to file that form and needs a certificate must apply at least 20 days before taking possession of or paying for the assets, whichever comes first, and that late registration can bring a penalty of up to $200. TP-153 says at least 20 days before you start business, open a new place of business, or take possession of or pay for the assets, whichever is earliest. If you take over the space weeks before you open, plan around that earlier date, not opening day, and have your accountant confirm it.

Sales tax on what you buy. The bulletin says you also owe sales tax on the tangible property you acquire, such as furniture, fixtures and equipment, paid either to the seller for its final return or directly to the department. It isn’t charged on inventory bought for resale, real property or intangibles like goodwill. How the price is split across those categories is a question for your accountant.

The seller’s own liability. The bulletin says the seller stays liable for its taxes, penalty and interest whether or not you’re relieved. That doesn’t protect you. Following the procedure does.

A fictional example

A buyer plans to purchase the fixtures, equipment and name of a made-up New York restaurant that’s closing. The seller collects sales tax, and the buyer isn’t buying the seller’s company. The draft contract asks for a deposit at signing, sets a December 15 closing and lets the buyer in on December 1 to start painting.

The buyer doesn’t plan around December 15. Before signing, they ask their lawyer whether the deposit counts as paying, whether December 1 access counts as taking possession, and which date goes on Form AU-196.10 as the scheduled date of sale. The lawyer sets the filing date and the Certificate of Authority application date from that answer. If a notice of claim arrives, the full price goes into escrow. If the department’s answer hasn’t arrived, the form was late, or the deal terms change, the buyer doesn’t take the keys or release money until the lawyer confirms where things stand.

Related reading

• Buying an existing restaurant: verify what you are buying for earnings, assets, liens and lease rights.
• Set up the restaurant business before taking money or hiring for the tax, bank and accounting setup around the new business.

Sources

• New York State Department of Taxation and Finance, Bulk Sales, Tax Bulletin ST-70 (TB-ST-70); issue date June 24, 2013; page shows “Updated: October 16, 2026”; read October 19, 2026. The bulletin says it is accurate as of its issue date and that later changes in the law may affect it.
• New York State Department of Taxation and Finance, Form AU-196.10, Notification of Sale, Transfer, or Assignment in Bulk (5/26), including the page 2 instructions and the Tax Law § 1141(c) text printed on the form; read October 19, 2026.
• New York State Department of Taxation and Finance, Form TP-153, Notice to Prospective Purchasers of a Business or Business Assets (12/13); read October 19, 2026.