Trade, Tariffs, and Tax Effects: Deal-maker Considerations for Diligence and Structuring

Riveron's M&A Tax and Transaction Services experts have observed the latest changes and evolving trends related to US trade and tariff policies and have participated in several discussions on the potential impacts. One specific perspective to consider is how the policies will affect tax due diligence and transaction structuring.  At a minimum, deal-makers should consider the following as a good place to start the conversation:

• Is the target company including tariffs in the prices for calculating sales and use tax liabilities and as part of property tax valuations of inventory and other purchased items? 
  • If not, has the target company received individual guidance, or has there been official guidance published by the states relevant to the target company? 
• Is the target company a current beneficiary of tariffs, or is it pursuing exemptions, reductions, or other exceptions to tariffs? 
  • The company should provide information as to the method of qualification and copies of relevant agreements. 
  • In addition, deal-makers should determine whether the agreements are legally transferable in the M&A situation.
• Are tariffs currently considered in existing transfer pricing arrangements?
  • Deal-makers should determine whether any analysis has been done regarding the effect of tariffs on these arrangements.