Buying a restaurant: the seller's sales tax, the health permit and the franchise
By Grig Kochedykov · . Legal points reviewed against the official sources listed below on 29 October 2026.
If you buy a running restaurant in Texas or Florida and pay before the state confirms the seller's taxes, you may have to pay the seller's unpaid state taxes. The health permit stays with the seller: in Florida and New York City it cannot be transferred, and in Texas the state form asks a new owner for a new application and fee. If the restaurant is a franchise, the franchisor may have to approve you.
General information, not legal or tax advice. Rules differ by state, city and contract.
In short: four things before you pay
- Ask the state, not only the seller, about taxes. In Texas and Florida, get the tax office's receipt or certificate before any money leaves you. In Texas, if it is not ready, hold back the amount the state names, not a round figure. In Florida, money held back and paid to the state within 30 days after the sale reduces the seller's tax debt, but only the certificate or the Department of Revenue's audit frees you of it fully.
- Plan for your own health permit. Read the last inspection reports. In New York City, ask about open violations and unpaid fines first: they can stop your new permit.
- Franchise: get the transfer terms in writing. Read the franchise's transfer rules before the deposit, and make the franchisor's approval a condition of closing.
- Licences in your own name. List every licence and permit, with the name on each. Each one you apply for again is a date in your closing plan.
The seller's unpaid sales tax can come with the restaurant
A restaurant collects sales tax every day. If the seller did not pass it all to the state, some states collect it from the buyer.
| Where | What the official source says | What to get before you pay |
|---|---|---|
| Texas | The buyer holds back enough of the price until the seller shows a receipt from the Comptroller (the state tax office) that the tax is paid, or a certificate that nothing is due. Otherwise the buyer may have to pay the seller's tax, up to the price. Ask early: the Comptroller has up to 90 days to answer (Tax Code § 111.020). The full rule is in our laundromat post | The Comptroller's receipt or certificate |
| Florida | A buyer of more than 50% of a business, its assets or its stock of goods may have to pay the seller's unpaid tax. Two ways out in full: a receipt or certificate of compliance from the Department of Revenue, if you and the seller share no insiders (people tied to both sides, such as a relative); or a department audit that finds nothing owed (F.S. 213.758) | The department's receipt or certificate; our note on the Florida certificate shows the steps |
| New York | The buyer gives the state notice before paying; the form and deadline are in our US guide | The notice, filed before the deposit |
A promise in the contract that the seller pays old taxes does not stop the state from coming to you. Then you chase the seller.
A real case: the escrow held back too little
California has a rule of the same kind. A decision of its tax appeals office shows it at work in a restaurant.
- In July 2015, a buyer agreed to buy a restaurant in the Los Angeles area, liquor licence included, for $230,000. The money went into escrow, an account a third party holds until closing.
- The escrow papers held back $11,500 of the seller's money for the state tax release. The sale closed on 9 September 2015. The state received the request for a tax clearance on 11 January 2016, four months later.
- The seller gave no books. From other records, including payment data reported to the IRS, the state found $485,361 of unreported sales.
- The state held the buyer liable as a successor, the person who takes over the business, for $32,182.67 of tax plus interest; the penalties were lifted.
- The buyer argued that the deal had been undone, but had kept running the restaurant. The panel also wrote that the law does not require the buyer to know about the seller's debt. The buyer lost (2023-OTA-285, issued 19 April 2023, not binding on later cases).
The lesson: the $11,500 was a figure picked in the escrow papers, not the seller's real tax bill. Ask the state for the clearance before closing, and hold back what it names.
The health permit stays with the seller
| Where | What the official source says | Where to look it up |
|---|---|---|
| Florida | The food service licence comes from the state: "Such license may not be transferred from one place or individual to another." Running without one is a misdemeanor, a minor crime (F.S. 509.241(1)) | DBPR food and lodging inspections: search by the restaurant's name |
| New York City | "Any purported or attempted transfer of a permit to a person not named therein as permittee … shall void such permit." After a sale, the city does not issue a new permit while its records show uncorrected violations or unpaid fines. The exception: the buyer proves an arm's length deal, one between unrelated parties: full control taken over, a market price paid, no family ties to the old owners. This refusal cannot be appealed to the Board of Health (Health Code §§ 5.11, 5.05(g)) | Ask the seller, in writing, for the permit and any open violations and fines |
| Texas | On the state's application form: "Change of ownership requires submission of a new application and fee." The form asks you to allow 4–6 weeks; the fees are not refunded. Larger cities may have their own health department (DSHS form EF23-10597) | The city or county health department, or the state office |
Buying the company itself, not only its assets? Ask the health office in writing whether your deal needs a new permit, and keep the answer.
An inspection report is a picture of one day. Read several: a problem that keeps coming back is a question for the seller and a cost for you.
If it is a franchise
Of the SBA-backed loans to buy a running fast-food restaurant in our count below, 726 of 1,422 (51.1%) carried a franchise code. For restaurants with table service, it was 155 of 1,757 (8.8%).
Federal rules set what goes in a franchisor's disclosure document (16 CFR § 436.5). Read Item 17 in it, a table called "The franchise relationship". Its rows on transfer point to the clauses on whether the franchisor must approve the sale, on what conditions, and whether it can take the deal at your price instead of you (a right of first refusal).
Ask the franchisor for its current disclosure document, and the seller for the franchise agreement. Then ask the franchisor in writing what it needs to approve you and what fee it charges.
If it serves alcohol
The liquor licence has its own rules in each state. In Texas, "The license or permit cannot be transferred to the new owner": the new owner applies, and it "takes about 45 to 60 days" (TABC FAQs). Before the deposit, ask the state's liquor regulator what your deal needs.
Our count: SBA loans to buy a running restaurant
We counted the 7(a) loans backed by the US Small Business Administration (SBA), approved in fiscal years 2020–2025, cancelled loans left out. A restaurant here is one of four codes in NAICS, the US industry classification: 722511 (table service), 722513 (fast food and counter service), 722514 (cafeterias and buffets) and 722515 (snack bars and coffee shops), plus the older codes for the same trades: 28,211 loans in all. One in eight (3,536, or 12.5%) paid for buying a restaurant that was already open, against 10.8% across all industries. The median such loan was $400,000.
Only SBA-backed loans are counted, and a loan is not the price. Some purchases may be filed under other loan purposes, so the real share may be higher. Data as of 30 June 2026.
What to save and compare in your list
When you weigh two restaurant listings, compare three things: franchise or not; the name on the food permit and the date of its last inspection; alcohol, and under which licence.
The PDF report from our free extension has lines for licences and for what exactly is for sale: the premises and equipment, or the company itself. If its licences line says "not stated", ask the seller whose name is on each licence.
Your next three steps
- The extension. On a computer: Add to Chrome — free or Add to Edge — free. Reading on your phone? Open this page on your computer. "Open a business-for-sale listing and press “Download PDF”. You get a report on the 12 things a check of the business needs: what the listing says about each, and which ones it does not say."
- Your account. "Saving a listing takes a My list account. In it, the listings you save from different sites sit in one place." Create my account.
- The check. The €550 report tells you "Whether the permit to run the business must be applied for again. Sometimes it is issued to one person and does not pass to a new owner." Start for €550. The €950 report also reads the seller's own papers and shows "Every claim about money the seller made and you passed to us, next to the document and the gap." Start for €950. Both are on our pricing page. We do not contact the seller. "You pay only if we take it on."
Sources
- Texas Tax Code, § 111.020, Tax collection on termination of business (retrieved 29 October 2026)
- Florida Statutes 2026, § 213.758, Transfer of tax liabilities (retrieved 29 October 2026)
- California Office of Tax Appeals, 2023-OTA-285 (nonprecedential), issued 19 April 2023 (retrieved 29 October 2026)
- Florida Statutes 2026, § 509.241, Licenses required; exceptions (retrieved 29 October 2026)
- Florida Department of Business and Professional Regulation, View Food & Lodging Inspections (retrieved 29 October 2026)
- New York City Health Code, Article 5, §§ 5.05 and 5.11 (retrieved 29 October 2026)
- Texas Department of State Health Services, Retail Food Establishment application, form EF23-10597 (rev. 29 January 2025) (retrieved 29 October 2026)
- Code of Federal Regulations, 16 CFR § 436.5, Franchise disclosure items (Item 17) (retrieved 29 October 2026)
- Texas Alcoholic Beverage Commission, FAQs (retrieved 29 October 2026)
- U.S. Small Business Administration, 7(a) & 504 FOIA loan data, as of 30 June 2026 (retrieved 29 October 2026)