The Big Question
What Taxes Do You Pay When You Buy a Business?
The Short Answer
Buying is not a taxable event for the buyer. You are spending money, not earning it, so nothing about the purchase price lands on your return as income. What the purchase does is set the starting point for every deduction you will take for years afterwards.
Three things still cost real money at or around the closing: how the price is split across what you bought, what your state charges to move the assets, and the tax the seller may owe that can follow those assets to you. The first is negotiated, the second is fixed, and the third is avoidable if you handle it early.
The Allocation Is a Negotiation, Not a Formality
An asset sale splits the price across classes of asset, and that split decides what you can write off and how fast. Purchase price allocation is the name for it, both sides file the same form, and the numbers on it have to agree.
The interests are opposed, which is why it belongs in the agreement rather than in a conversation with your accountant in April. A buyer wants weight on equipment and other short-lived assets, because bonus depreciation can pull those deductions forward, while goodwill is written off slowly. A seller usually wants the opposite, because weight on equipment triggers depreciation recapture taxed as ordinary income. Neither side is being difficult. They are reading the same number from two directions.
Raise it while price is still open, because it is a term you can trade against price rather than a form you fill in afterwards. The offer is where it belongs.
What Your State Charges to Move the Assets
States tax the transfer itself in ways that vary more than anything else in a deal. Some charge sales tax on the tangible assets, some exempt a sale of a whole business, some charge a documentary or transfer tax where real property moves, and vehicles and liquor licenses usually have their own line.
This site does not publish a rate for your state, because a rate we have not read at the state's own department is folklore. What it does publish is the rule that catches buyers out: what each state requires at closing covers 46 states, and in 27of them the duty falls on the BUYER to hold back part of the price against the seller's unpaid tax until a clearance certificate arrives. That one is not a rate. It is a debt that can follow the assets to you, and what you take on covers where it sits among the rest.
What Changes in the First Year You Own It
From the closing forward you are the taxpayer. The business files on your entity, payroll tax registration has to exist before the first run, and a sales tax permit in the new entity's name is one of the items that quietly holds up opening. In an asset purchase these are new registrations rather than inherited ones, which is the same reason employment ends and restarts.
The deduction side is where the allocation pays off. Equipment can be expensed under the rules its class allows, goodwill is written off across its statutory life, and interest on the acquisition loan is a business expense. The first year usually shows more deduction than the steady state, which is worth knowing before you read year one as the new normal in the underwrite.
None of this is tax advice, and this is the subject where the distance between what a page can say and what a deal needs is largest. Take the allocation to a CPA before the agreement is signed rather than after, which is the one piece of timing that changes the outcome.