Thursday, July 2, 2009

Beware the Certificate of Good Standing!

For years, many Alabama lawyers and CPAs have operated under the assumption that the Certificate of Good Standing that can be obtained from the Alabama Department of Revenue's website covers all taxes for the taxpayer in question. They further assume that the certificate would protect their clients from potential successor liability issues, if those arose in the future.

However, when you carefully examine the Department of Revenue's website and the certificate you obtain from the website, you will note that it actually only covers Alabama's business privilege tax, and does not cover sales and use taxes or withholding taxes. The certificate does serve some purposes, but it most likely would not protect a client from successor liability issues for sales and use tax or withholding tax purposes if push came to shove.

The Department of Revenue does not advertise the service, but it is possible to obtain an "all tax" Certificate of Good Standing. That must be requested through the Revenue Commissioner's office and takes some time to obtain, so be certain to give yourself the necessary time before you expect to need to have the certificate in hand. You can also obtain a certificate for a specific tax by contacting the appropriate division of the Department of Revenue.

Beware of this trap for the unwary.

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