Tax Type
Corporation Income Tax
Description
Determination of Exempt Status
Topic
Exemptions
Date Issued
01-17-2000
January 17, 2000
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****
This is in response to your letter of October 22, 1999, in which you seek a ruling on behalf of an unidentified client (the "Taxpayer') regarding the application of the retail sales and use tax to a proposed transfer of assets.
FACTS
The Taxpayer is a North Carolina corporation that owns and operates retail stores and distribution centers in Virginia and surrounding states. The Taxpayer owns its distribution centers, automotive fleets, and administrative offices, but it leases most of its retail locations. Currently, the Taxpayer is the parent corporation of three wholly-owned subsidiaries. All the retail stores, distribution centers, and
management functions in Virginia reside with one subsidiary.
The Taxpayer is contemplating a transaction whereby it will contribute substantially all of its assets and liabilities to a newly formed, single member limited liability company ("LLC'). In exchange for the contribution of assets, the Taxpayer will receive sole ownership interest in the LLC. The Virginia assets will be transferred to the new LLC in a single month. Upon completion, 99 percent of the Virginia assets will have been transferred to the LLC. Assets in other states will be transferred over a twelve to thirteen month period on a state-by-state basis. Further, there will be a continuation of business by the Taxpayer with no changes in its officers or its ownership structure.
You suggest that this transaction will be exempt from Virginia retail sales and use tax as an occasional sale.
RULING
Code of Virginia Sec. 58.1-609.10(2) provides an exemption from the tax for an occasional sale as defined in Sec. 58.1-602. That section defines an "occasional sale' as:
If you have any questions regarding this issue, please contact ***** in the department's Office of Tax Policy at *****
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/25672I
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****
This is in response to your letter of October 22, 1999, in which you seek a ruling on behalf of an unidentified client (the "Taxpayer') regarding the application of the retail sales and use tax to a proposed transfer of assets.
FACTS
The Taxpayer is a North Carolina corporation that owns and operates retail stores and distribution centers in Virginia and surrounding states. The Taxpayer owns its distribution centers, automotive fleets, and administrative offices, but it leases most of its retail locations. Currently, the Taxpayer is the parent corporation of three wholly-owned subsidiaries. All the retail stores, distribution centers, and
management functions in Virginia reside with one subsidiary.
The Taxpayer is contemplating a transaction whereby it will contribute substantially all of its assets and liabilities to a newly formed, single member limited liability company ("LLC'). In exchange for the contribution of assets, the Taxpayer will receive sole ownership interest in the LLC. The Virginia assets will be transferred to the new LLC in a single month. Upon completion, 99 percent of the Virginia assets will have been transferred to the LLC. Assets in other states will be transferred over a twelve to thirteen month period on a state-by-state basis. Further, there will be a continuation of business by the Taxpayer with no changes in its officers or its ownership structure.
You suggest that this transaction will be exempt from Virginia retail sales and use tax as an occasional sale.
RULING
Code of Virginia Sec. 58.1-609.10(2) provides an exemption from the tax for an occasional sale as defined in Sec. 58.1-602. That section defines an "occasional sale' as:
- A sale of tangible personal property not held or used by a seller in the course of an activity for which he is required to hold a certificate of registration, including the sale or exchange of all or substantially all the assets of any business and the reorganization or liquidation of any business, provided such sale or exchange is not one of a series of sales and exchanges sufficient in number, scope and character to constitute an activity requiring the holding of a certificate of registration. (Emphasis added.)
If you have any questions regarding this issue, please contact ***** in the department's Office of Tax Policy at *****
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/25672I
Rulings of the Tax Commissioner