If you are registered with the Department of Revenue for collection and payment of Tennessee taxes, you must notify the department if business ownership changes in any manner. This change could be:
- selling or closing the business,
- adding or changing partners,
- transferring or changing the ownership of the business, or
- changing corporate structure requiring a new charter or certificate of authority.
Also, you must also notify the Department of Revenue if the business location changes.
Failure to notify the department of such 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? It's Easy.
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). All closures will require that the business have filed a final return and remittance of all taxes for which you are registered. Furthermore, 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
If any person liable for any tax, penalty, or interest levied hereunder sells out the person's business or stock of goods, or quits the business, the person will make a final return and payment within 15 days after the date of selling or quitting the business. The person's successor, successors, or assigns, if any, will withhold a sufficient amount of the purchase money to cover the taxes, interest, and penalties due and unpaid until the former owner can produce a receipt from the Commissioner of Revenue showing that the taxes have been paid, or a certificate stating that no taxes, interest, or penalties are due. If the purchaser of a business or stock of goods fails to withhold the purchase money as indicated, the purchaser will be personally liable for the payment of the taxes, interest, and penalties accruing and unpaid on account of the operation of the business by any former owner or operator.
- Sales and Use Tax
If any of the changes mentioned should 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 make 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. (Tenn. Code Ann. Section 67-6-513) 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 could also be held liable for the tax due on such property or services.
- Franchise and Excise Taxes
Before you can terminate your charter, articles of organization, or certificate of limited partnership, or withdraw its certificate of authority or other similar document, a tax clearance certificate must be issued by the Department of Revenue. In order to receive a tax clearance certificate, you must file all returns to date and a final franchise, excise tax return through the date of liquidation or the date the taxpayer ceased operations in Tennessee. A schedule of liquidation, distribution, or disposition of all assets must accompany the final return. The final franchise tax will be determined by using the balance sheet values immediately preceding liquidation. (Department of Revenue Rule 1320-6-1-.11) When these 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 unless otherwise specified. To complete the termination or withdrawal process, you must contact the Tennessee Secretary of State's Office for that office's requirements. The tax clearance certificate is valid for 45 days from the date of issuance. It is the responsibility of the commissioner to collect the franchise and excises tax due, plus any penalties and interest, from any officer, stockholder, partner, member, principal, or employee of a taxpayer that has ceased business without paying the tax, if the person has received property of the defunct business. The amount of tax that may be collected in this situation may not exceed the value of the property received by the person from whom collection is sought. (Tenn. Code Ann. Section 67-4-2117) If you go out of business or otherwise cease to exist during a year, you are not entitled to prorate the excise tax liability due. Franchise tax proration is allowed only on:
- an initial return or
- a change of accounting period. (See Tenn. Code Ann. Section 67-4-2115).
- Liquor-by-the-drink Tax
Any person that sells, transfers, or otherwise terminates ownership in a business engaged in sales of alcoholic beverages for consumption on the 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. "Notice" means direct written notice to the department 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. (Tenn. Code Ann. Section 57-4-303) Any person who, upon sale or transfer of the business, allows or permits the new owner or operator to remit tax, make wholesale purchases, or conduct business in any manner using the seller's or transferor's alcoholic beverage license or tax registration will be jointly and severally liable with the new owner or operator for any unpaid taxes accrued during the period of illegal operation. Any person failing to provide the required notice to the Department of Revenue, with the result that the new owner continues to operate under the seller's or transferor's alcoholic beverage license, will be presumed to have allowed the illegal operation to occur.
- Locally Administered Taxes
If you are liable for business tax, you must file a "Final" business tax return for the county and, if appropriate, the city in which the business is domiciled. The "Final" return(s) must be filed with the Department of Revenue no later than 15 days within closing the business.
If you are liable for any locally collected tax, you must contact the appropriate city or county clerk. You need to notify these officials that you have closed your business. You will receive any pertinent closure information from the respective county or city official at that time.
- 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 and owing within 15 days after the date of selling or terminating your business. The taxes for the current year are to be paid in accordance with the assessment records of the local assessor's office which shall be based on the last assessment and tax rate fixed according to law. (See Tenn. Code Ann. Section 67-5-513). Click here for more information.