Am I liable for unpaid HST if I only buy the assets?

Buying assets means buying specific property, not the seller’s tax account. The seller’s GST/HST registration, past returns and any balance owing belong to the seller. What a buyer still has to manage is the tax on the purchase itself and, in some provinces, a check on the seller’s standing. Rules differ by province and by the facts of the deal, so treat this as a map of where the exposure sits.

What stays with the seller

The CRA says a registrant that closes a GST/HST account must tell the CRA why, file a final return and remit any amounts it owes. For a sole proprietorship, it adds that a new owner cannot keep using the old business number and has to get a new one with new program accounts. Those rules leave the seller’s filing duties and balance with the seller and have the buyer begin with its own registration.

The tax on the assets themselves

Where HST applies, buying assets can attract tax on the price. The CRA says the parties can jointly elect so that no GST/HST is payable on the sale of a business, or part of one, if the conditions are met. The election cannot be used when only individual assets are sold, and the purchaser files it on form GST44 by the due date of its next GST/HST return in which tax would otherwise have been payable. A missed or invalid election leaves the ordinary rules to apply to the price.

Provincial rules can go further

Provincial sales taxes have rules of their own. British Columbia’s Ministry of Finance says a purchaser should ensure they have a clearance certificate before buying a business, and that the certificate confirms the seller has paid all amounts owing under the legislation, including penalties and interest. That advice suggests a purchaser can have something at stake there. Other provinces differ, so ask the provincial ministry or your tax advisor what applies where the business operates.

Before closing

• Ask the seller to confirm in writing that returns are filed and any balance is paid.
• Decide with your accountant whether the going-concern election applies and who files it.
• Have the agreement say which tax liabilities, if any, the buyer assumes, and add an indemnity for the rest.