Closing Out Your Account
| Closing Out Your Account |
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PREFACE
As a retailer, you knew the importance of obtaining all required accounts when you started a business. It is equally
important to know that you must inform the California Department of Tax and Fee Administration (CDTFA) to close
out your account(s) when any one of the following occurs:
• You are no longer actively engaged in business;
• You no longer sell prepaid wireless products or services;
• You qualify as a small seller of prepaid wireless products or services and you decide not to voluntarily collect
the surcharge from your customers on and after January 1, 2017;
• You sell your business or stock of goods to someone else;
• You change the type or form of ownership for your business (for example, from a sole proprietorship to a
corporation or partnership);
• You add a new partner or a partner leaves the business, and your partnership agreement calls for dissolution of
the partnership and the formation of a new partnership when a change in partners occurs.
If you fail to notify the CDTFA of these changes, you could be held liable as a predecessor for taxes, fees, surcharges, inter-
est and/or penalties which are incurred by a successor entity even though you cease to own or operate the business.
This publication covers the following topics related to closing out your account:
• Notifying the CDTFA
• Filing your final tax, fee, or surcharge return
• Sales after closing out your account
• Successor’s liability and tax clearances
• Changes in ownership
If you want more information about any of these topics, please contact the CDTFA’s Customer Service Center at
1-800-400-7115 (TTY:711). Staf will be happy to answer your questions.
We welcome your suggestions for improving this or any other publication. If you would like to comment, please
provide your comments or suggestions directly to:
Audit and Information Section, MIC:44
California Department of Tax and Fee Administration
PO Box 942879
Sacramento, CA 94279-0044
Note: This publication summarizes the law and applicable regulations in effect when the publication was written,
as noted on the cover. However, changes in the law or in regulations may have occurred since that time. If there
is a conflict between the text in this publication and the law, the decision will be based on the law and not on this
publication.
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NOTIFYING THE CDTFA
If you sell, change partners, or close out your business, you should let us know. The following information may be
needed before we can close out your account:
• The date you stopped being actively engaged in business.
• Your reason for not being actively engaged in business.
• The name(s) of any partner(s) who have dissociated from or been added to the partnership with effective dates.
• The means you used to dispose of your resale inventory, furniture, fixtures, and equipment. If you sold any
of these items, you will need to disclose the selling price. If you sold your entire business, a portion of your
business, or all or substantially all your resale inventory, you need to provide the selling price, name of the
buyer, and a copy of the bill of sale or purchase agreement with the amount of purchase price.
• The purchase price of retained inventory.
• Your current address, daytime telephone number, and email address.
• The address where you retain your books and records.
• Your business website address, if available.
You can use the enclosed CDTFA-65, Notice of Closeout, to notify us. The form will be reviewed by staff, who
will contact you if additional information is required. If no additional information is needed, staff will close out
your account.
You also need to file your final return and any prior returns (including prepayments) which you have not yet filed.
To expedite your closeout, you should file these returns with the local office and pay any tax, fee, surcharge, penalty
and interest with certified funds. If you paid by personal check and cannot provide a copy of the cancelled check, it
may take eight or more weeks to complete the closeout of your account. Accounts required to make their tax, fee,
or surcharge payments by EFT must also make their final payments through the EFT process.
After you have paid your entire liability (including liabilities resulting from an audit), staff will return any security
you have on deposit. It is important to remember that, even after providing all information and having your account
closed out, you must still keep your business records for four years.
Filing your fnal tax, fee, or surcharge return
Even though you have closed out your account, you must still report your sales up to the closeout date. This
includes any sales of furniture, fixtures, or equipment that occurred as part of the closure or sale of your business.
You must also report any inventory you intend to retain for your own use if that inventory was purchased without
payment of any tax, fee, or surcharge.
To help expedite the closeout you should separately report and identify the sale of “fixtures and equipment” and
“retained inventory” on your final return.
Sales of inventory to another retailer for resale or to the purchaser of your business are not taxable, but should
be reported as “Sales to Other Retailers for the Purpose of Resale” on your return. A resale certificate should be
obtained from the buyer and saved with your records.
Normally, you may file your final return on its regular monthly or quarterly due date. However, if you report
annually, you must file the final return by the due date of the quarter in which you close out your account.
Closing out your account and filing your final return does not relieve you of a liability for any unpaid tax, fee, or
surcharge whether reported or unreported. You are required to pay all tax, fee, or surcharges incurred for the period
you were actively engaged in business.
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If the business is a corporation, partnership, limited partnership, limited liability partnership, or limited liability
company which has added or included tax as part of the price of the property sold, or owes use tax, corporate
officers or other persons may be held personally liable for unpaid tax if they willfully failed to pay or caused not to
be paid the tax that was due and were:
• Responsible for filing returns or paying tax, or
• Under a duty to act for the corporation in complying with the Sales and Use Tax Law.
If you think you may have difficulty paying tax that is due, you should contact the local office handling your account.
Taxable sales after closing out your account
Before requesting the close out of your account, you should be sure that you will make no more sales. You generally
must register as a seller if you make three or more sales of tangible personal property (including retained inventory,
fixtures, or equipment) in any 12-month period. As a seller, you are required to register with the CDTFA and to
report and pay any tax, fee, or surcharge due.
In certain cases, a single sale of fixtures and equipment which occurs after the close out can also be taxable. A
retail sale which occurs within 60 days is normally considered taxable unless you can prove that the sale was not
contemplated at the closeout date. A sale that occurs after 60 days, but within one year, is taxable if:
• There was a contract of sale at the closeout date, or
• A lease with an option to buy existed at the closeout date, or
• There is evidence that a plan existed to sell the fixtures and equipment in due course
You are liable for use tax if you make personal or business use of property purchased without tax, for example,
resale inventory. You are required to r eport and pay use tax on the cost of such property.
Successor’s liability and tax clearance
If you are buying a business, you need to be aware of successor’s liability.
Under the law, the buyer of a business or stock of goods must withhold from the purchase price an amount
sufficient to cover the seller’s liability for tax, interest, and penalties. If a sufficient amount is not withheld, the buyer
may be held personally liable for the amount that should have been withheld. This is called “ successor’s liability” and
is limited to an amount equal to the purchase price of the business or stock of goods.
To be released from this liability, the buyer may request a certificate of tax clearance from the CDTFA.
The following is a list of information to include in your written request for a tax clearance:
• The name, address, and phone number of the purchaser.
• The name, address, and phone number of the seller.
• The business address. If the business has more than one location and the purchaser is buying one or more
locations, but not all of the locations, each location for which a tax clearance is requested must be listed. If the
business has more than one location and all the locations are being purchased, please note that in the request.
• A copy of the bill of sale or purchase agreement with the amount of purchase price.
• The name of the escrow company and escrow number, if applicable.
• The date the business was purchased.
If a tax clearance is needed to complete the sale of your business, you need to remember that it can take 60 days or
more to obtain a clearance, especially if an audit is required and the seller's books and records are not available for
review. You can help the clearance process by ensuring that the escrow company or buyer promptly files a written
request for a clearance with the local CDTFA office.
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You should also remember that:
• The liability of a successor does not replace your primary liability for unpaid tax, interest, or penalties. The
CDTFA will generally only try to collect from a successor if unable to do so from the seller of the business.
• The amount of money you actually receive on the sale of your business may be reduced by the amount you
owe. If you owe tax, you will be advised to pay the amount due and the escrow company will be informed of the
amount to withhold from the purchase price to cover the liability. This liability must be paid to the CDTFA, includ-
ing the tax due on the sale of any furniture, fixtures, and equipment, before a certificate of tax clearance is issued.
Changes in ownership
If you plan to change the ownership of your business or have already done so, you should contact the CDTFA’s
Customer Service Center. Failure to notify the CDTFA of a change in ownership can make you liable for the taxes
owed by the new owner(s).
If you continue to operate your business but change its form of ownership, you are required to obtain a new
account. An account is valid only for the business entity (such as a sole proprietorship, partnership, corp oration,
limited liability company, or joint venture) in whose name it was issued and certain changes in ownership will
invalidate it. For example, a new account is required when:
• A partnership adds or drops a partner and the partnership agreement requires that a new partnership be
formed.
• There is a change in marital status for a married co-ownership.
• There is a change in the status of a registered domestic partnership.
• Your business converts from one type of organization (such as those named above) to another type of
organization.
• A corporate reorganization or merger results in a new corporation.
Since some changes in ownership might also include taxable transfers of tangible personal property, it is
recommended to contact the CDTFA before making the change. The staff can review the planned change and tell
you if it would be subject to tax and if you will need a new account.
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FOR MORE INFORMATION
For additional information or assistance, please take advantage of the resources listed below.
INTERNET
www.cdtfa.ca.gov
CUSTOMER SERVICE CENTER You can log onto our website for additional information—such as laws, regulations, forms,
1-800-400-7115 publications, industry guides, and policy manuals—that will help you understand how the
TTY:711 law applies to your business.
Customer service representatives are a vailable You can also verify seller’s permit numbers on the CDTFA website (look for “Verify a
weekdays from 8:00 a.m. to 5:00 p.m. (Pacific Permit, License, or Account”) or call the CDTFA’s toll-free automated verification service at
time), except state holidays. In addition 1-888-225-5263.
to English, assistance is available in other Multilingual versions of publications are available on the CDTFA website www.cdtfa.ca.govat .
languages. Another good resource—especially for starting businesses—is the California Tax Service
Center at www.taxes.ca.gov.
OFFICES
City Telephone Number TAX INFORMATION BULLETIN
The quarterly Tax Information Bulletin (TIB) includes articles on the application of law
Bakersfield 1-661-395-2880 to specific types of transactions, announcements about new and revised publications,
Cerritos 1-562-356-1102 and other articles of interest. You can find current TIBs on our website at www.cdtfa.
ca.gov/taxes-and-fees/tax-bulletins.htm. Sign up for CDTFA updates email list and receive
Culver City 1-310-342-1000 notification when the latest issue of the TIB has been posted to our website.
El Centro 1-760-352-3431
FREE CLASSES AND SEMINARS
Fairfield 1-707-427-4800 Most of the CDTFA statewide offices offer free basic sales and use tax classes with some
Fresno 1-559-440-5330 classes offered in other languages. Check the Sales and Use Tax Section on our website at
Glendale 1-818-543-4900 www.cdtfa.ca.gov for a listing of classes and locations. You can also call your local office
for class information. We also offer online seminars including the Basic Sales and Use Tax
Irvine 1-949-440-3473 tutorial and how to file your tax return that you can access on our website at any time.
Oakland 1-510-622-4100 Some online seminars are also offered in other languages.
Rancho Cucamonga 1-909-257-2900 WRITTEN TAX ADVICE
Rancho Mirage 1-760-770-4828 For your protection, it is best to get tax advice in writing. You may be relieved of tax,
Redding 1-530-224-4729 penalty, or interest charges that are due on a transaction if we determine that we gave
you incorrect written advice regarding the transaction and that you reasonably relied on
Riverside 1-951-680-6400 that advice in failing to pay the proper amount of tax. For this relief to apply, a request
Sacramento 1-916-227-6700 for advice must be in writing, identify the taxpayer to whom the advice applies, and fully
describe the facts and circumstances of the transaction.
Salinas 1-831-443-3003
For written advice on general tax and fee information, please visit our website at:
San Diego 1-858-385-4700 www.cdtfa.ca.gov/email to email your request.
San Francisco 1-415-356-6600 You may also send your request in a letter. For general sales and use tax information,
San Jose 1-408-277-1231 including the California Lumber Products Assessment, or Prepaid Mobile Telephony
Services (MTS) Surcharge, send your request to:
Santa Clarita 1-661-222-6000
Audit and Information Section, MIC:44
Santa Rosa 1-707-576-2100 California Department of Tax and Fee Administration
Ventura 1-805-677-2700 PO Box 942879
Sacramento, CA 94279-0044
West Covina 1-626-480-7200
For written advice on all other special tax and fee programs, send your request to:
Out-of-State Offices Program Administration Branch, MIC:31
California Department of Tax and Fee Administration
Chicago, IL 1-312-201-5300
PO Box 942879
Houston, TX 1-713-739-3900 Sacramento, CA 94279-0031
New York, NY 1-212-697-4680
TAXPAYERS’ RIGHTS ADVOCATE
Sacramento, CA 1-916-227-6600 If you would like to know more about your rights as a taxpayer or if you have not been
able to resolve a problem through normal channels (for example, by speaking to a
Motor Carrier Office supervisor), please see publication 70, Understanding Your Rights as a California Taxpayer,
W. Sacramento, CA 1-800-400-7115 or contact the Taxpayers’ Rights Advocate Office for help at 1-916-324-2798 (or toll-free,
1-888-324-2798). Their fax number is 1-916-323-3319.
If you prefer, you can write to: Taxpayers’ Rights Advocate, MIC:70; California Department
of Tax and Fee Administration; P.O. Box 942879; Sacramento, CA 94279-0070.
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Regulations, forms, and publications
Lists vary by publication
Selected regulations,forms, and publications that may interest you are listed below. Spanish versions of our
publications are also avaiable online.
Regulations
1595 Occasional Sales–Sale of a Business–Business Reorganization
1596 Buildings and Other Property Affixed to Realty
1699 Permits
1702 Successor's Liability
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CDTFA-65 (FRONT) REV. 34 (1-20) STATE OF CALIFORNIA
NOTICE OF CLOSEOUT CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION
INSTRUCTIONS: Please provide the following information to assist us in closing your account(s), releasing security, or issuing an
escrow clearance. If you have a seller’s permit, before completing this form, you should refer to a copy of the California Department
of Tax and Fee Administration (CDTFA) publication 74, Closing Out Your Account. Publication 74 contains important information about
closing out your permit. If you have any questions, please call our Customer Service Center at 1-800-400-7115 (CRS:711).
CDTFA Use Only
CDTFA Use Only
CDTFA Use Only
SECTION I:ACCOUNT INFORMATION
NAME ACCOUNT NUMBER(S)
CURRENT ADDRESS (street address) DAYTIME TELEPHONE NUMBER
( )
CITY STATE ZIP CODE
SECTION II: CLOSEOUT INFORMATION (see back for instructions)
1. Date business was closed
2. Did you make any purchases for your own use using your seller’s permit? YES NO
If YES, did you pay tax on those purchases to: a. your vendor b. the CDTFA
3. If applicable, remaining inventory, purchases for resale, or purchases from out-of-state vendors without payment of tax were:
a. Sold and Reported on Final Return b. Retained c. Included in an Audit d. Donated to
e. Sold for Resale (Purchaser’s Account Number: ) f. Other
4. Do you have a prepaid Mobile Telephony Services (MTS) account? YES NO
a. Date you discontinued selling prepaid phone cards and/or services
b. If you qualify as a small seller, date you want your account closed out
5. Your forwarding address and telephone number
6. Location of your books and records
7. Was the business sold? YES NO
a. Date the business was sold
b. Total sales price $
c. Name, address, and telephone number of the purchaser
d. Didyousellthefixturesandequipment(F&E)? YES NO If no, proceed to line h.
e. SellingpriceofF&E$
f. DidthesaleofF&Eoccurattheplaceofbusinessthatwassold? YES NO
g. If not, provide address for the place of business where the sale took place
Note: Ifyousoldyourfixturesandequipment,evenifyoudidnotsellyourbusiness,youmustincludethesellingpriceofthese
itemsonyourfinalreturnunder“PurchasesSubjecttoUseTax”.
h. Escrow number
i. Name, address, and telephone number of escrow company
SECTION III: SIGNATURE
SIGNATURE PRINT NAME AND TITLE DATE
CLEAR PRINT
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CDTFA-65 (BACK) REV. 34 (1-20)
NOTICE OF CLOSEOUT
SECTION IV: LIST OF ITEMS NEEDED FOR CLOSEOUTS
Thefollowingitemsmaybeneededtofinalizetheclosingofyouraccount(s),thereleasingofanypostedsecurity,orissuingofan
escrow clearance.
• Payments of any other outstanding balances due.
Yourfinaltaxreturnwithpayment(ifareturnisnotavailable,call1-800-400-7115[CRS:711]).Paymentofanyamountsduemust
bemadeincertifiedfundsinordertoexpeditefinalizingyourtransaction.IfyouarerequiredtomakepaymentsbyElectronic
FundsTransfer(EFT),youmustalsomakeyourfinalpaymentthroughtheEFTprocess.
Acopyofyourescrowinstructionsorbillofsaleshowingthevalueofinventory,fixtures,andequipmentsold.
Send this completed form and your supporting documents to:
California Department of Tax and Fee Administration
Customer Service Center
PO Box 942879
Sacramento, CA 94279-0090
SECTION V: INSTRUCTIONS
If the items listed below do not pertain to your closeout and you have completed Sections I and II, and signed in Section III,
send this document to the appropriate CDTFA office. See publication 74 for a list of CDTFA office locations.
Small Sellers–A“smallseller”isaprepaidMTSseller(otherthanatelecommunicationservicesupplier)whomadelessthanthe
annual threshold of sales of prepaid MTS in the previous calendar year. Beginning January 1, 2017, small sellers are no longer required
to charge and collect the prepaid MTS surcharge from their customers. For sellers that have more than one location, the sales of
prepaid wireless services and products from all locations must be used to determine their annual sales. Small sellers are responsible
for maintaining records to show that their annual sales are below the annual threshold.
Location of your books and records–The location of your books and records is important for audit purposes. Audits are important
because they protect the state against an underpayment and protect the taxpayer against an overpayment.
Copy of your escrow instructions or bill of sale–Thesedocumentsshowthevalueofinventory,fixtures,andequipmentsold.Ifa
saleoffixturesandequipmentisnotconsideredatthedateofcloseout,asubsequentsinglesaleofthefixturesmaybetreatedasan
occasionalsale.Thesinglesaleoffixturesandequipmentsubsequenttothedateofcloseoutistaxableifeither:
1. The sale occurs within 60 days of the date of closeout and the taxpayer cannot establish that the sale was not contemplated at the
time of closeout; or
2. The sale takes place after 60 days and within one year of the closeout date, and:
a. A contract of sale existed at the date of closeout, or
b. A lease with an option to buy exists, or
Arrangementshavebeenmadeforaplantosellthefixturesandequipmentinduecourse.
If these items are not provided, the CDTFA must wait 30 days before refunding any security deposits posted and/or closing
your account. If you need assistance in providing any of the items listed above, contact your nearest CDTFA office for detailed
instructions.
FOR CDTFA USE ONLY
Is registration information current? YES NO F&E? YES NO
Isafinalreturnfiled? YES NO Inventory? YES NO
Wasafinalreturnprovidedtotaxpayer? YES NO Is the documentation attached? YES NO
Are there any delinquencies? YES NO Unapplied payment? YES NO
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| CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION • 450 N STREET • SACRAMENTO, CALIFORNIA MAILING ADDRESS: P.O. BOX 942879 • SACRAMENTO, CA 94279-0001 PUBLICATION 74 DECEMBER 2018 | |