How to Deregister from a State for Sales Tax

When Can You Deregister?

You can close a state sales tax registration when you no longer have nexus in that state. Common reasons:

• Revenue dropped below the threshold: If your sales into a state fell below the economic nexus threshold for a full calendar year (or the applicable lookback period), you may no longer have an obligation
• You closed a physical location: Closing an office, store, or warehouse in a state eliminates physical nexus (assuming you don't have economic nexus separately)
• You stopped selling into a state entirely
• You stopped using Amazon FBA in a state: If Amazon removes your inventory from a state's fulfillment centers, you lose that physical nexus trigger

The Deregistration Process

Each state handles deregistration differently, but the general steps are:

1. File all outstanding returns for the periods you were registered — you must be current before closing your account
2. Submit a close-out return covering any remaining uncollected period
3. Notify the state via their online portal (most states have a "close account" or "cancel registration" option)
4. Retain your records for the state's lookback period (typically 3–4 years) even after you close the account

Most states allow deregistration via their online portal:

• Texas: comptroller.texas.gov via eSystems
• California: CDTFA Online Services
• New York: New York Business Express
• Illinois: MyTax Illinois
• SST states: Via the state's portal or SSTRS system

What Happens If You Don't Deregister?

If you stay registered but stop filing returns, the state will eventually notice. Unfiled returns trigger notices, assessments, and penalties — even if you genuinely had no sales to report. A zero return filed on time is always better than an unfiled return.

States may also charge a minimum fee or require zero returns to maintain an active registration in some jurisdictions.

Threshold Dropped — But Don't Deregister Too Fast

Some states require a full year below the threshold before you lose the obligation. If you crossed a state's threshold in 2024, you were obligated through at least all of 2025 (since prior-year crossing creates a full-year obligation). Check the specific state's rules before canceling.

Taxero monitors your threshold status continuously and notifies you when you've sustained a sub-threshold period long enough to safely deregister.

Common Questions

If I deregister and cross the threshold again later, do I need to re-register? Yes — re-register as you would for the first time. The process is the same.

Do I need to do anything with my customers after deregistering? Stop charging sales tax in that state from the deregistration date forward. Update your checkout settings accordingly.

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