When a retail establishement (say, a restaurant) is sold, there is a well-known problem of sales tax.  Some will definitely be owed to the government, at least that amount since the last quarterly payment.  There may also be unpaid sales tax liability.  A well-settled procedure is set down in statute, and if followed allows the purchaser to take the restaurant without any potential sales tax liability.  If it is not followed, the purchaser will become liable for all of the unpaid sales tax.  East to follow, no?  Well, this issue comes up time and time again.  Here is an example found in Nilazra, Inc. v Karakus, Inc.  2016 NY Slip Op 01302  Decided on February 24, 2016  Appellate Division, Second Department.

“The plaintiff commenced the instant action to recover damages arising from a sales tax lien that accrued after it purchased a restaurant from the defendant Karakus, Inc. (hereinafter the seller). The defendant third-party plaintiff, Nellie Levitis, also known as Nelly Levitis (hereinafter Levitis), represented the plaintiff as the purchaser, and the defendant third-party defendant, Erik Ikhilov, represented the seller. Tax Law § 1141(c) requires that at least 10 days prior to the transfer of a business, the purchaser must file a notification of sale, transfer, or assignment in bulk (hereinafter the notification) with the New York State Department of Taxation and Finance (hereinafter the Department). The failure to timely file the notification results in the seller’s sales tax liabilities attaching to the purchaser (see Tax Law § 1141[c];Randazzo v Nelson, 128 AD3d 935; Yiouti Rest. v Sotiriou, 151 AD2d 744, 745).

Levitis alleges that Ikhilov had a pre-existing relationship with the plaintiff’s principal, Emir Huner, and that he referred Huner to her to perform legal services in relation to the purchase of the restaurant. Levitis further alleges that Ikhilov assured her and her client that he would timely file the Notification with the Department, and would hold the amount of the purchase price in escrow to pay any sales tax determined to be owed by the seller. In addition, Levitis alleges that Ikhilov promised to prepare, and in fact did prepare, all of the other documentation, including the contract of sale, riders, and schedules necessary to consummate the sale of the restaurant. Ikhilov did not file the notification with the Department until the closing date. As a result of the late filing, the seller’s tax liabilities in the amount of $83,333.33 attached to the purchaser. The total purchase price of the restaurant was $90,000.

The Supreme Court properly determined that the third-party complaint, as supplemented by Levitis’s affidavit, sufficiently pleaded a cause of action to recover damages for negligence, as it alleged, inter alia, that Ikhilov voluntarily assumed Levitis’s duty, as the attorney for the purchaser, to timely file the notification with the Department, and breached that duty (see AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 5 NY3d 582, 594; see also Schwartz v Greenfield, Stein & Weisinger, 90 Misc 2d 882 [Sup Ct, Queens County]; cf. Council Commere Corp. v. Schwartz, Sachs & Kami, 144 AD2d 422, 424).

Contrary to Ikhilov’s contentions, Levitis sufficiently pleaded causes of action seeking both contribution and indemnification (see AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 5 NY3d at 595; McDermott v City of New York, 50 NY2d 211, 217; see also Mitchell v New York Hosp., 61 NY2d 208, 218; Cohn v Lionel Corp., 21 NY2d 559, 563).

Ikhilov’s evidentiary submissions did not show that the material facts claimed by Levitis to be facts were not facts at all and that no significant dispute exists regarding them (see Rabos v R & R Bagels & Bakery, Inc., 100 AD3d at 851-852; see also Guggenheimer v Ginzburg, 43 NY2d at 274-275).”