Form CDTFA-65 "Notice of Closeout" - California

What Is Form CDTFA-65?

This is a legal form that was released by the California Department of Tax and Fee Administration - a government authority operating within California. As of today, no separate filing guidelines for the form are provided by the issuing department.

Form Details:

  • Released on August 1, 2021;
  • The latest edition provided by the California Department of Tax and Fee Administration;
  • Easy to use and ready to print;
  • Quick to customize;
  • Compatible with most PDF-viewing applications;
  • Fill out the form in our online filing application.

Download a fillable version of Form CDTFA-65 by clicking the link below or browse more documents and templates provided by the California Department of Tax and Fee Administration.

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Closing Out Your Account
Closing Out Your Account
Preface
As a retailer, you knew the importance of registering for permits, licenses, and 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 mobile telephony services.
• You qualify as a small seller of prepaid mobile telephony services and you decide not to voluntarily collect the local
charge 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 us of these changes, you may be held liable as a predecessor for taxes, fees, surcharges, interest 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 have questions that are not answered in this publication, please visit
www.cdtfa.ca.gov
or call our Customer Service
Center at 1-800-400-7115 (CRS:711). Customer service representatives are available to assist you Monday through Friday
from 8:00 a.m. and 5:00 p.m. (Pacifc time), except state holidays.
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
Please 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.
Notifying the CDTFA
If you sell your business, 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 names of any partners who have dissociated from or have 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 must 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 the 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 our
Online Services Portal
to close your account(s) if you are registered in our Online Services system. However,
if you use a Limited Access Code to file your returns or do not have an online account with us, then you would need to 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 necessary, staff will close out your account.
You must also file your final return and any prior returns which you have not yet filed, and make any payments for
amounts still owed. To expedite your closeout, you should file these returns on our Online Services Portal and pay any
tax, fee, surcharge, penalties, and interest due. We recommend you pay using certified funds. If you pay 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 required information and closing your account, you
must 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 and pay tax on any inventory you retain for your own use, that you 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 or to the purchaser of your business for resale are not taxable and 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 taxes, fees, or surcharges incurred for the period you were
actively engaged in business.
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 tax in accordance with
Revenue and Taxation Code (R&TC) section
6829
and
Regulation
1702.5, Responsible Person Liability.
If you think you may have difficulty paying tax that is due, you should contact the local office handling your account.
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CLOSING OUT YOUR ACCOUNT | AUGUST 2021
Taxable sales after closing out your account
Before requesting the close out of your account, you should be sure that you do not make additional taxable sales. Under
the Sales and Use Tax Law, generally, any person that makes three or more sales of
tangible personal property
(including
retained inventory, fixtures, or equipment) in any 12-month period is 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 of closeout 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 of closeout, is taxable if any of the
following are true:
• There was a contract of sale at the closeout date.
• A lease with an option to buy existed at the closeout date.
• 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, such as, resale
inventory. You are required to report and pay use tax on the cost of such property.
Sales of Business Assets – Fixtures, Equipment, and Inventory
In California, retail sales of tangible personal property, including business assets, are generally subject to tax unless
exempted or excluded by statute. Pursuant to
Revenue and Taxation Code section 6367
and
Regulation
1595, Occasional
Sales—Sale of a Business—Business Reorganization, occasional sales are generally exempt from tax. Under the occasional
sales exemption, tax does not apply to the sale of business assets that are held or used in the course of any activity not
requiring you to hold a seller’s permit, unless the asset sale is one of a series of sales sufficient in number, scope, and
character to require you to hold a seller’s permit. Generally, if you make more than two asset sales for substantial amounts
within a 12-month period, you will be required to register for a seller’s permit and collect applicable tax. See Regulation
1595 for more information.
Example:
If you operate a service-based business, such as a laundromat, that does not require you to hold a seller’s permit, and
you make two sales of business assets such as a washing machine and a press for substantial amounts within a 12-month
period, on February 23, 2020, and August 16, 2020, these two sales may be considered occasional sales and exempt from
tax. If you make two additional sales of other business assets on January 8, 2021, and February 8, 2021, for substantial
amounts, these sales may not be occasional sales since they are the third and fourth sales in a series of sales within the
same 12-month period as the first two sales. In this example, the third and subsequent sales made during the same
12-month period as the first two sales will likely result in you being required to hold a seller’s permit and be subject to tax,
unless otherwise exempt.
In California, if you are engaged in the business of selling tangible personal property of a kind that would be subject to
tax, you must register with the CDTFA to obtain a seller’s permit
(Regulation
1699, Permits). Both wholesalers and retailers
must register for and obtain a permit. When a business that holds a seller’s permit sells their fixtures and equipment to a
third party, sales tax will generally apply to the sale of those fixtures and equipment.
Sales of Inventory for Resale
If you sold assets, such as inventory, to a third party that purchased the inventory for the purposes of resale and you
were provided with a valid and timely resale certificate, then the transaction is a sale for resale and not subject to tax
(Regulation
1668, Sales For Resale).
Service Businesses That Only Make Incidental Sales of Tangible Personal Property
If you are predominantly a service-based business that holds a seller’s permit for your incidental sales of merchandise and you
made a sale of business assets to a third party, tax generally only applies to the sales of the business assets sold that were held
or used in the retail portion of the business, that is, the part of the business that required you to obtain a seller’s permit.
For example, a barber shop’s primary activity is generally performing a non-taxable service (cutting hair). If a business,
such as a barber shop, also engages in an incidental selling activity (such as selling hair care products) which requires
the barber shop to hold a seller’s permit, only the sale of business assets held or used in the activity requiring the seller’s
permit (selling hair products) is taxable. Accordingly, a seller of a barber shop would owe tax on sales of assets held or
used for purposes of making retail sales of hair care products, such as, display cases, shelves, computers, cash registers,
and any other similar assets. However, tax would generally not apply to sales of business assets held or used for purposes
of rendering hair cutting services such as trimmers and blow dryers.
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If you are not required to hold a seller’s permit, the sale of your business assets are not be subject to tax, unless the sale is
one of a series of sales requiring you to hold a seller’s permit as discussed above.
Determining the Value of Fixtures and Equipment (F&E)
When you, the seller, have agreed with the buyer on a specific price for the sale of taxable F&E, then that specific price
should be used to determine the taxable amount to be reported on your sales and use tax return. In instances where
there is a bulk sale of a business and the parties have not agreed to a specific price for the sale of taxable F&E, the parties
have implicitly agreed to buy and sell the F&E at its current value. In this case, to determine the sales price of taxable
F&E, you should use the book value. If the book value is not available, you can use the appraised value for property tax
purposes or value determined by an independent appraisal.
Successor’s liability and tax clearance
If you are buying a business, you need to be aware of successor’s liability. The buyer of a business or stock of goods can be
held personally liable for the outstanding tax liabilities of the seller. Please see
Regulation
1702, Successor’s Liability.
Generally, the buyer of a business or stock of goods must withhold from the purchase price an amount sufficient to cover
the seller’s outstanding liability for tax, interest, and penalties, if any. If a sufficient amount is not withheld, the buyer may
be held personally liable for the amount that should have been withheld, up to the purchase price of the business or
stock of goods.
The buyer will be released from its obligation to withhold the purchase price if it obtains a certificate of tax clearance
from the CDTFA stating that no taxes, interest, or penalties are due from the seller.
You, as a buyer, can expedite the clearance process by promptly filing a tax clearance request, or if you are buying a business
through an escrow company, you should ensure that the escrow company requests the certificate on your behalf. To
complete the tax clearance online, go to our Online Services portal at www.cdtfa.ca.gov, select the Login/Register tab, and
then select the Request a Sales Tax Clearance function. Alternatively, you can submit a written request for a tax clearance to
your local CDTFA office.
The following is a list of information to include in your written request for a tax clearance:
• The name, address, and telephone number of the purchaser.
• The name, address, and telephone 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 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.
You should also remember that:
• If you need a tax clearance to complete the sale of a business, 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 immediately available for
review.
• The liability of a successor does not replace the seller’s primary liability for unpaid tax, interest, or penalties. We will
generally only try to collect from a successor if unable to do so from the seller of the business.
• The amount of money the seller actually receives on the sale of its business may be reduced by the amount it owes. If
the seller owes tax, it will be advised to pay the amount due and we will notify the escrow company of the amount to
withhold from the purchase price to cover the liability. This liability must be paid to the CDTFA, including the tax due
on the sale of any furniture, fixtures, and equipment, before a certificate of tax clearance is issued.
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