Do I need a bulk sale clearance certificate when I sell my business in Manitoba?

Section 45 of The Tax Administration and Miscellaneous Taxes Act (TAMTA) defines a “sale in bulk” as a sale, barter or exchange of inventory outside the seller’s ordinary course of business, or of tangible personal property used by the seller to carry on business if it is sold, bartered or exchanged in connection with the seller ceasing to carry on the business or the part of it in which the property was used. Manitoba Finance’s bulletin TAMTA 002 adds that a sale of shares or partnership interests is not a bulk sale.

Who applies, and what must be shown

Under section 45(2), the seller must apply to the director before disposing of the property, for a certificate verifying that the seller has no tax debt or that arrangements satisfactory to the director for paying it have been made. The bulletin counts tax, penalties, interest, fees or other charges owing under seven listed statutes, including The Retail Sales Tax Act. With written authorization, the seller’s legal representative, such as a lawyer or accountant, can apply. The bulletin lists what goes in with the application and says there is no fee.

What the certificate does and does not do

Once satisfied on either point, the director issues it in duplicate, and under section 45(5) the seller gives one copy to the buyer. Under section 45(6), unless the buyer obtains that copy, the buyer is liable, once assessed under section 46, for the seller’s tax debt as at the date of sale, including amounts assessed on or after that date for transactions before it, and the debt may be enforced against the buyer, the seller or both. Under section 45(8), a tax debt owing when the certificate was issued that the director later discovers from new information can be enforced against the seller but not against a buyer who obtained a copy.

Your RST account and the buyer’s RST

Bulletin RST 004 says retail sales tax (RST) numbers are non-transferable and that Manitoba Finance must be notified immediately when the business is sold or ceases to operate. Separately, bulletin TAMTA 002 says the buyer must pay RST on taxable assets on a Casual Purchaser’s Return, because a seller ceasing business does not collect it; for vehicles requiring registration under The Drivers and Vehicles Act, Manitoba Public Insurance collects it when the registration is transferred. It also lists taxable assets commonly sold in a bulk sale.