Sale & Purchase Agreements in Washington

By Brad MacLiver
Authorship and profile at Google


A Pharmacy Listing Agreement is the contract that provides a pharmacy broker the business seller’s permission to sell their Washington drug store. During the process of presenting the business being sold to qualified drug store buyers there are negotiations and preliminary offers.

Once the preliminary stages have been negotiated it is time to put forth the details of the potential pharmacy transaction in contract form. This contract is usually called the Purchase and Sale Agreement, but it may also be referred to as an Asset Purchase and Sale Agreement, Pharmacy Asset Purchase Agreement, Asset Purchase Agreement, or variations of these contract titles. Whatever the title is on the contract, this document should be considered the “blueprint” for transferring the Washington pharmacy business to the new owner.  

The Pharmacy Purchase and Sale Agreement details how much the buyer agrees to pay and what assets the seller in Washington is conveying to the buyer. When the agreement is put in writing, describes the transaction in some detail, and is accepted and signed by both parties, this contract becomes a legally binding agreement. Therefore, during the negotiated development of the Pharmacy Purchase and Sale Agreement proper diligence should be taken.

Due to liability issues it is seldom that a Washington pharmacy’s corporate stock will be purchased. Therefore, these transactions almost always are only asset purchases.

The elements in a Pharmacy Purchase and Sale Agreement are not limited to but can include: assets purchased, assets excluded, aspects regarding counting and purchasing the inventory, electronic and hard copies of pharmacy customer files, liabilities, purchase price, closing date, transferring the assets' title when being purchased, conversion of pharmacy customer files, warranties and representations, non-compete clauses, restrictive covenants, transferring the phone services, notification of customers, signs, Board of Pharmacy notifications, accounts receivables, business seller and pharmacy employee employment, confidentiality, pharmacy inventory counting, any costs associated with closing, lien searches, actions to be taken before the closing date, the pharmacy’s computers, office equipment, and automated filing machines.

Although it covers many aspects of transferring the business assets from the pharmacy seller in Washington to the new owner, it should be understood that the Purchase & Sale Agreement does not provide tax and legal guidance for the seller. Those issues do not pertain to the buyer of the assets. Therefore, the pharmacy seller should be well advised by a knowledgeable pharmacy broker, accountant, or attorney regarding tax consequences, restrictive covenants, and the structure of the deal. These aspects of the deal may not have any impact from the buyer’s point of view, but if not considered carefully may have affects to the seller’s financial position after the transaction is closed.

Washington pharmacy owners who are considering selling will benefit when working with a specialist who operates exclusively in the pharmacy industry and can provide expert guidance in bringing about a transaction that provides the most benefits regarding the seller’s tax consequences, family and estate planning. Proper planning and a blueprint that structures the transaction appropriately will increase the net amount of money the seller receives for the pharmacy’s assets.

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Pharmacy Transactions in Washington and Capital Gains Tax

By Brad MacLiver
Authorship and profile at Google


Almost everything you own and use for personal, or business, purposes is a capital asset. When WA pharmacy owners sell a capital asset, the difference between the amounts you sell it for and the amount you paid for it (the basis), is a capital gain, or a capital loss.

Capital gains may also refer to "investment income" that arises in relation to real assets, such as property, financial assets, and intangible assets such as goodwill. In the U.S., all capital gains must be reported and the appropriate tax paid.

When selling a Washington pharmacy or a drug store, there are specific tax strategies that can be used to help offset the tax liabilities. Unless a professional is handling a large number of pharmacy acquisitions, they usually do not know these federal regulations that allow for reducing the tax liability for the pharmacy owner.

During this period of history where it is more difficult to finance a business, pharmacy sellers may have already been required to lower their asking price so pharmacy buyers can qualify for the financing required.  In addition to having lower offers, they are also required to pay a higher percentage in taxes.

This is a dilemma for the pharmacy seller in WA who wants as much money out of the deal as possible. For most who own a pharmacy, their business is the largest asset they will ever own and their retirement and estate plan rely on selling the business at a certain dollar amount.  With the knowledge that they will need to cut out a larger chunk of the proceeds to give to the government, this will cause some pharmacy owners to reconsider their retirement plans.  However, there is good news in that there are financial tools and strategies that allow the pharmacy owner in Washington to proceed with their plans.

One strategy is to utilize Family Foundations.  These are tax exempt/nonprofit organizations that provide tax advantages and control over philanthropic activities. Family foundations are usually private foundations funded by a small number of sources.  They do not hold widespread fund-raising events, but they may receive gifts from friends and other limited sources.  The founder's family members serve as the trustees, directors, and officers. Because they are private foundations, they can make grants or donations to other organizations. Having a Family Foundation provides a number of benefits including, income tax deductions, exemptions from estate and gift taxes, along with the reduction or elimination of other taxes.

Yet another strategy that is currently available to assist the capital gains tax burden is the Charitable Remainder Trust (CRT). CRT’s are legally described as Split Interest Trusts. The term is used because of the blend of philanthropic motivations and personal financial aspects. CRT’s can decrease tax liabilities, increase a business owner financial wealth, and at the same time provide a vehicle for charitable giving.

CRT’s are formed when a person donates assets to this special type of Trust. Assets can be cash, stocks, real estate, etc. The CRT is set up for a set period of time, or until the donor’s (pharmacy owners) death. An individual (WA pharmacy owner or family member) can receive income from the Trust’s assets. Upon the donor’s death the assets go to a designated charity. Part of the income from the Trust can be used to purchase life insurance on the donor. The proceeds of the life insurance go to a designated heir(s) who receive the money without incurring any estate tax liability.

Some tax strategies including the use of CRTs are not widely known. It would be advisable for pharmacy business owners in Washington to be aware of the different tools that are available in structuring a business transaction. They should also be aware that only a professional with vast experience in CRTs should be used to setup a Charitable Remainder Trust. Not following the strict IRS guidelines could be cause for increased taxes, penalties, and in some cases criminal charges.

Over the years there have been unscrupulous individuals who have tried using CRTs and similar financial tools in illegal scams. With the increase in capital gains taxes there are expectations more scams will be floating around out there. Be knowledgeable about the possibilities, but be confident you are working with experts in your industry.

You should consult a firm with extensive experience in pharmacy and drug store acquisitions. Firms that have the knowledge and expertise to structure the transaction appropriately, for tax considerations, can save a Washington pharmacy owner large sums of money when a WA pharmacy is sold.

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