Close Your Business
If you are registered with the Department of Revenue for collection and payment of Tennessee taxes, you must notify the Department with any business ownership changes. This change could be:
- selling or closing the business,
- adding or changing partners,
- transferring or changing the ownership of the business,
- changing corporate structure requiring a new charter or certificate of authority or
- changing the business location.
If you have a resale certificate, and you are closing your business, you must also notify your suppliers in writing that your certificate is no longer valid. Failure to notify the Department of the above business changes could result in assessment of your business for delinquent taxes, penalty, and interest after your business has actually ceased operations, creating avoidable inconvenience for the taxpayer and unnecessary expenditure of state funds and resources to resolve the assessment.
How Do I Close My Account?
All closures require that businesses file final tax returns and remit taxes for which they are registered.
Most account closures can be handled by calling the Department of Revenue at (800) 342-1003 (Nashville-area and out-of-state: (615) 253-0600). If the taxpayer has been issued a license or permit, these must be surrendered and will be revoked by the Department. If you have posted a bond of any type against your tax account, the bond must remain posted until all outstanding liabilities are settled. Under Tennessee law and Department of Revenue rules, there are some specific actions that must be taken for certain taxes:
- Business Tax
- Businesses holding standard business tax licenses must file and pay business taxes due to the Tennessee Department of Revenue within 15 days after the business ceases operation or is sold to another entity.
- Businesses holding minimal activity licenses should contact the county clerk and city recorder’s office to advise them the business is no longer operational.
- If the business is sold to another entity, purchase money should be withheld to cover any taxes, interest, and penalties that the business may owe. This is only necessary until the former business owner can show proof from the Department of Revenue that all taxes have been paid and no interest or penalties are due. Under state law, the purchaser of the business can be liable for the unpaid taxes, penalties, and interest charges of the previous owner or operator.
- Sales and Use Tax
- If any business ownership changes occur, answer the questions on the back of the business's certificate of registration, and mail it to the Department of Revenue.
- The new owners or officers, if applicable, must then apply for a new certificate of registration.
- If you sell your business or go out of business, you must file a final sales or use tax return and pay all sales or use tax due within 15 days after the date you sold or quit the business.
- If you sold the business, the purchaser must apply for a certificate of registration in his or her own name. Any taxpayer allowing a new business owner to purchase property or services tax-exempt using that taxpayer's registration and certificate of resale not only is guilty of a misdemeanor, but also could be held liable for the tax due on such property or services.
- Franchise & Excise Taxes
- The Department of Revenue must issue a tax clearance certificate before you can terminate your charter, articles of organization or certificate of limited partnership. You also need a clearance certificate in order to withdraw a certificate of authority or another similar document.
- In order to get a tax clearance certificate, you must be up to date on filing all your tax returns, as well as making all your payments. This includes filing a final franchise and excise tax return through the date of liquidation or the date the taxpayer ceased operations in Tennessee. Similarly, all tax, penalty and interest owed must be paid.
- Please note that you compute your franchise tax differently once you begin activities that result in your business liquidating:
- If you initiated and completed the liquidation in a single day, the final franchise tax is determined by using the balance sheet values immediately preceding liquidation.
- If the liquidation occurs over more than one day, the franchise base will be the greater of the "average monthly values" of net worth or tangible property. The liquidation could include multiple returns.
- If your return is for a short period, the tax may be prorated and rents should be annualized. Worksheets are available here as well as here to help you compute average monthly values and the annualization of rents and proration of tax for short period returns.
- When all filing and payment requirements have been met, the Department of Revenue will issue the tax clearance certificate for termination or withdrawal. The certificate will be mailed to your listed mailing address.
- To complete the termination or withdrawal process, you must contact the Tennessee Secretary of State's office for their requirements.
- Liquor-by-the-drink Tax
- Any person that sells, transfers or terminates ownership in a business that sells alcoholic beverages for consumption on its premises must provide notice of the sale, transfer, or termination to the Department of Revenue within 15 days of the effective date of the sale, transfer, or termination.
- The notice to the Department should be in writing as part of the final alcoholic beverage return and final sales tax return of the business.
- The business's alcoholic beverage license must also be surrendered to the Alcoholic Beverage Commission.
- If a person selling or transferring a business allows the new owner of the business to pay tax, make wholesale purchases or conduct any business using the seller's alcoholic beverage license or tax registration, then the seller and the new owner will be jointly liable for any unpaid taxes accrued during the period of illegal operation.
- Tangible Personal Property Taxes (Division of Property Assessments)
- You must notify the local assessor of property and local collecting official(s) if you sell or terminate your business. You must make payment of any taxes, interest and penalties due within 15 days after the date of selling or terminating your business.
- The taxes for the current year should be paid in accordance with the assessment records of the local assessor's office. Click here for more information.