§237-43  Bulk sales; transfers; penalties. (a)  In any case of the sale or transfer in bulk of the whole, or a large partof a stock of merchandise and fixtures, or merchandise, or fixtures, or otherassets or property of a business, otherwise than in the ordinary course oftrade, business, commerce, or sales, the seller shall make a written andverified report of the bulk sale or transfer to the department not later thanten days after the possession, or the control, or the title of the property, orany part thereof, has passed to the purchaser.  The report shall contain thename and address of the purchaser, a brief description of the property sold andthe purchase price, the date when the sale or transfer is to be or wasconsummated, and such other facts as the department may require.  The purchasermay make the report for the seller.

(b)  The purchaser of the property shallwithhold payment of the purchase price until the receipt of a certificate fromthe department to the effect that all taxes, penalties, and interest levied oraccrued under title 14 for taxes administered by the department against theseller, or constituting a lien upon the property, have been paid.  Acertificate shall not be issued while the department investigates (including byaudit) whether taxes have been levied or accrued against the seller.  Thecertificate shall show on its face that the department has had notice of thebulk sale or transfer, and shall also show the names of the seller andpurchaser, a brief description of the property sold or transferred, and thedate of consummation of the sale or transfer, together with such otherinformation as the department shall prescribe.

(c)  If the required report of the bulk sale ortransfer is not made, or if the taxes, penalties, and interest shall not bepaid within twenty days after the sale or transfer, or within such further timeas the department may allow, the purchaser shall be personally liable to pay tothe State the amount of all taxes, penalties, and interest levied or accruedunder title 14 for taxes administered by the department against the seller orconstituting a lien upon the property, together with penalties and interestthereafter accruing, not exceeding, however, the amount of the purchase price. The issuance of a certificate in the prescribed form shall be a completedefense to the bulk sale or transfer liability imposed in the precedingsentence, but shall not be a defense to any liability of the purchaser underany other provision of law for liabilities and obligations.  Any purchasersucceeding to the liabilities of the seller under this section shall make awritten report thereof upon the next due date for the reporting of gross incometaxes.

(d)  For purposes of this section:

"Property" means anything that may bethe subject of ownership, including every kind of asset, whether real orpersonal, tangible or intangible, and without limitation, such as land andbuildings, goodwill, notes, accounts, and other intangible property.  The term"property" shall not include any interest in residential realproperty.

"Purchase price" means the total fairmarket value, as of the date of sale or transfer, of all property transferred,whether or not money or property is exchanged therefor.

"Purchaser" means any person whoreceives property in a bulk sale or transfer, whether or not money or propertyis exchanged therefor.

"Sale" means the transfer of propertyfor compensation.

"Seller" means any person who sellsor transfers any property in a bulk sale or transfer, whether or not money orproperty is exchanged therefor.

"Transfer" means the sale,conveyance, or distribution by any mode, direct or indirect, absolute orconditional, voluntary or involuntary, of title to or beneficial ownership inproperty, or interest therein.  The term "transfer" does not includea bona fide, arm's length:

(1)  Creation, modification, or termination of a leaseinterest;

(2)  Creation, modification, or release of a lien orencumbrance; or

(3)  Transfer occurring as a result of the enforcementof a lien.

(e)  Failure to make the report required bythis section shall be punishable by a fine of not more than $100.  Any sellerwho wilfully fails to make the report required by this section shall, inaddition to other penalties provided by law, be guilty of a misdemeanor andupon conviction thereof, shall be fined not more than $5,000 or imprisoned notmore than one year, or both.

(f)  The purchaser shall have the purchaser'sremedy against the seller for the amount of taxes, penalties, or interest paidby the purchaser.

(g)  This section supplements and does notdisplace any remedies available to the department under the Uniform FraudulentTransfer Act and the principles of law and equity. [L 1941, c 265, §8; RL 1945,§5476; RL 1955, §117-40; am L Sp 1959 2d, c 1, §16; HRS §237-43; gen ch 1985;am L 1995, c 92, §14 as superseded by c 120, §1; am L 1996, c 132, §§1, 2]