Michigan Form 163: Closing Your Tax Accounts After a Sale

What Form 163 Is

Form 163 is the Notice of Change or Discontinuance. Businesses use it to tell the Michigan Department of Treasury about changes to their registered tax accounts, including when the business is sold or closed.

Treasury's guidance says a seller must notify its Registration Section. The form can be filed online through Michigan Treasury Online, often called MTO.

Which Accounts It Touches

Most operating companies are registered with Treasury for one or more of these:

• Sales tax, if you sell taxable goods to customers
• Use tax, for taxable purchases you didn't pay tax on
• Withholding, for income tax taken out of employee paychecks

When you sell the business, these accounts belong to your company, not the operation. They don't pass to the buyer. The buyer registers its own accounts, and yours get closed or changed.

Why It Comes Before Tax Clearance

The Form 5156 instructions say that if Form 163 has not been submitted, it must be filed electronically through MTO before you request tax clearance. Treasury also asks for a copy of Form 163 with the clearance request when discontinuing.

That order matters, because your tax clearance is what releases the money the buyer holds in escrow. See the Form 5156 guide for how that works.

Final Returns Still Come Due

Filing Form 163 does not end your obligations. Your company still files final returns for each account covering the period up to the sale, and pays what is owed.

Common sense rules apply. Sales you made before closing are yours to report. Paychecks your company issued are yours to withhold on. The buyer handles everything after.

Your CPA or bookkeeper usually prepares these. Tell them the exact closing date as soon as it is set.

Asset Sale or Stock Sale

Asset sale

This is the usual case for companies under a few million in value. Your company sells its assets and the buyer starts fresh. Your company stops operating, so you file Form 163 and close the accounts.

Your company may still exist for a while after closing to collect a seller note or wrap up bills. Closing tax accounts is not the same as dissolving the company.

Stock or membership sale

Here the buyer purchases the company itself. The company keeps its accounts and keeps filing, now under new owners. Form 163 may still be used to report changes, like new officers. Your attorney and CPA will tell you what applies.

Mistakes That Slow Things Down

The most common problem is simple: Form 163 never gets filed, and Treasury keeps expecting returns. Missing returns then show up as balances, and the tax clearance stalls.

Another is a final return that leaves out sales from the last few days before closing. Agree on the cutoff with the buyer, then make sure your books match it.

A third is forgetting that a company can have more than one account. Check them all before you call it done.

Other Accounts to Close

Treasury is not the only office that tracks your business. Your unemployment tax account sits with the Unemployment Insurance Agency, which has its own forms. See the UIA 1027 guide.

Local accounts matter too. Cities with their own income tax, including Detroit, expect final returns from businesses that stop operating there. Personal property tax filings with your city or township may also need a final update.

A Simple Checklist for Closing Week

• Last day of sales under your company
• Last payroll date
• Form 163 filed online
• Final returns scheduled with your CPA
• Form 5156 requested after Form 163

Put these dates on one page and share it with your CPA, attorney and broker. It saves a lot of calls.

Outside Michigan

Everything here applies to Michigan accounts. If your company also collects tax or withholds for another state, that state has its own closing process.

Curious what your company could bring before you think about closing accounts? Send the short form or call (313) 555-0152. The overall sequence is on our how a sale works page.