When your business no longer has a sales tax obligation in a state, you can de-register and stop filing. Here's how the process works and what to consider before starting.
When de-registration may be appropriate
You can typically de-register in a state when all of the following are true:
Your sales no longer meet the state's economic nexus threshold.
You no longer have any physical nexus in the state (offices, employees, inventory, contractors, etc.).
Any trailing nexus period (where applicable) has fully expired.
Use the transactions report in your Zamp account to filter by state and date. This shows the volume that determines your eligibility for de-registration in each state.
Key concepts to know
Economic nexus
Most states require registration when sales or transactions exceed a threshold (often $100,000 or 200 transactions annually), based on the 2018 South Dakota v. Wayfair decision. De-registration is possible when these thresholds are no longer met, no physical nexus exists, and any trailing nexus period has expired. Economic thresholds vary by state.
Trailing nexus
Some states require continued registration for a period (often one year) after falling below the threshold. The trailing nexus period varies by state, so check the specific rule before assuming you can close out.
Home rule states
In states like Alabama, Arizona, Colorado, and Louisiana, local jurisdictions may have separate registration requirements that complicate de-registration. You may need to close out at both the state and local levels.
The general de-registration process
Notify the state's tax authority (often through their online portal).
File a final sales tax return.
Resolve all outstanding tax liabilities.
Complete any state-specific forms or actions required to close the account.
Specific forms or portal actions vary by state. Contact the state tax authority directly if their website doesn't list de-registration procedures explicitly.
Record retention after de-registration
Even after you de-register, you must retain records for the state's statute of limitations (typically 3 to 7 years) in case of a future audit.
Let Zamp know if you de-register
If you de-register with one or more states, please let us know so we can update our records and stop filing on your behalf. Reach out at [email protected].
Disclaimer
This article is a general overview. Sales tax rules change, and de-registration requirements vary by state and business situation. Please consult a qualified sales tax professional before making decisions about closing out your registrations.