Tax Type
Retail Sales and Use Tax
Description
Multinational manufacturer, occasional sale exemption
Topic
Appropriateness of Audit Methodology
Exemptions
Date Issued
08-20-2004
August 20, 2004
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in response to your letter in which you seek correction of retail sales and use tax audit assessments issued to ******** (the "Taxpayer") for the periods January 1992 through May 1992 and January 1992 through December 1993. These assessments are associated respectively with (1) the Taxpayer's Distribution Equipment Division ("DED"), located in ***** and (2) the Taxpayer's Mining and Construction Division ("M&CD"), located in *****. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer is a multinational manufacturer of a wide range of products including automotive supplies, electrical products, household goods, and manufacturing equipment. In April 1992, the Taxpayer sold all of the assets of its DIED and effectively ended the division's operations. In October 1993, the Taxpayer sold all the assets of its M&CD, also ending this division's operations.
The only issue in this case is the application of the occasional sale exemption to the sales of these assets by the Taxpayer.
DETERMINATION
Virginia Code § 58.1-609.10(2) provides an exemption from the retail sales and use tax for an occasional sale. The term "occasional sale" is defined in Va. Code
§ 58.1-602 to mean:
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- A sale of tangible personal property not held or used by the 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.
The Tax Commissioner has previously determined that the sale of all or substantially all of the assets of a business division may qualify as an exempt occasional sale. Under this scenario, the business division must be engaged in totally separate and distinct activities based on such considerations as separate books that are separately maintained, separate bank accounts, separation of fixed assets, separation of employees, and the flow of economic advantage from one division of the organization to another. See, for example, Public Documents 85-149 (7/11/85) and 99-24 (3/11/99).
Based on the information presented, the Taxpayer's sales of the DIED and the M&CD are the sales of all or substantially all the assets of a business and, therefore, are exempt occasional sales. Accordingly, the contested transactions will be removed from the audit assessments. This action will reduce both outstanding assessments to zero.
The Code of Virginia sections and public documents cited are available on-line in the Tax Policy Library section of the Department of Taxation's website, located at www.tax.state.va.us. If you have any questions about this determination, please contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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- Kenneth W. Thorson
Tax Commissioner
- Kenneth W. Thorson
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AR/17784i
Rulings of the Tax Commissioner