Planning for sales taxes when you close a business

by David Rodeck January 30, 2014

close a business

close a business

If you need to close a business, you need to make sure the shutdown goes smoothly and doesn’t create problems for you later on. One point you need to address are the final sales taxes for your business. This process is pretty straightforward and there are just a few things to watch out for.

Report the closing to the state government

Your state government needs to know that you are closing down your business. The government should have a form that gives this notice. For example in California you would submit a Form BOE-65, Notice of Close Out. This is so the agency in charge of sales taxes knows that your business is going to stop collecting taxes. You’ll also need to return your business’ sales tax certificate. If you had to make a deposit to get your certificate, the state should return this money after you’ve filed your last return and returned the certificate.

Process a transfer

If you are transferring or selling the business to someone else, the process is similar to closing your business. You need to report the transfer to the authorities and you still need to return your sales tax certificate. The new owner can’t use your certificate and will need to apply for a new certificate in his or her name. You may also need to collect sales taxes for selling some of your business assets to the new owner. These will need to be submitted with your final business sales tax return.

File a last sales tax return 

You’ll also need to file your business’ last sales tax return before you can shut down. Make sure that your business will make no more sales and won’t need to collect any more taxes before you file. This includes the sale of your business assets to a new owner, if applicable. Once you are sure your business won’t have any more income, put together your final sales tax return, calculate the remaining tax you need to pay, and submit the return plus taxes to the government.

Mishandling the close

If you don’t properly close out your business for sales taxes, it can lead to costly problems down the road. If you don’t submit your final sales tax return and taxes on-time, the state government could add extra interest, taxes, and penalties to the amount you owe. If you don’t return your certificate for sales taxes promptly, you could forfeit your deposit. You should also never let another person use a sales tax certificate in your name. This is a misdemeanor and get you in serious legal trouble.

If you can follow the process in this guide though, sales taxes won’t create any lingering problems after you close your business. This way you can move on to your next project with a clean slate.

David Rodeck
David Rodeck
David Rodeck

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