March 18, 2015
Re: § 58.1-1824 Application: Retail Sales and Use Tax
Dear *****:
This is in reply to your letter in which you submit a protective claim for refund of overpaid sales and use tax for the period June 2013 on behalf of ***** (the "Taxpayer"). I apologize for the delay in responding to your request.
FACTS
The Taxpayer operates as a hospital. During the period at issue, the Taxpayer sold its in vitro fertilization lab (the "Lab") to the ***** (the "Buyer"). The Taxpayer states that certain items of tangible personal property were sold to the Buyer in conjunction with the sale of the Lab. The Taxpayer states it collected sales tax on the sale of the tangible personal property in the amount of ***** and it remitted the same to the Department. The Taxpayer contends that the sale of the Lab is an occasional sale in accordance with Va. Code §§ 58.1-602 (definition of occasional sale), 58.1-609.10 2 and Title 23 of the Virginia Administrative Code (VAC) 10-210-1080.
The Taxpayer requests: (1) a ruling that the sale of the tangible personal property at issue is exempt of the tax pursuant to the occasional sale exemption, and (2) a refund of the sales tax collected and remitted with respect to this sale.
DETERMINATION
Occasional Sale Exemption — Sales Tax Registration
Virginia Code § 58.1-609.10 2 states that the retail sales and use tax does not apply to "An occasional sale as defined in § 58.1-602." Virginia Code § 58.1-602 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.
The Taxpayer contends that the sale of the Lab should be considered an occasional sale as defined in Va. Code § 58.1-602 because it was a sale of assets "not held or used by the seller in an activity for which it was required to hold a certificate of registration." The Taxpayer maintains that it is required to be registered for the sales and use tax with respect to sales made in an employee cafeteria and in the retail gift shop. The Taxpayer states that none of the assets of the Lab were linked to these sales, and the assets were not required to produce any of the items for which the Hospital was required to be registered.
Title 23 VAC 10-210-1080 A states that "The tax does not apply to an occasional sale provided the sale or exchange is not one of a series of sales or exchanges sufficient in number, scope and character to constitute an activity requiring the holding of a certificate of registration."
Title 23 VAC 10-210-1080 B provides, in pertinent part, that the term "occasional sale" means:
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. The words "not held or used by a seller in the course of an activity for which he is required to hold a certificate of registration" mean that a registered dealer is not entitled to an occasional sale exemption solely by virtue of the fact that the article sold may be of a different class.
In this instance, the Taxpayer is registered for the retail sales and use tax because of the retail sales made in its cafeteria and gift shop. The tangible personal property sold in conjunction with the Lab is not of the type for which the Taxpayer is required to hold a sales tax registration with the Department. Accordingly, the occasional sale exemption, based on the certificate of registration criteria, applies to the sale of the tangible personal property at issue.
Because the occasional sale exemption is applicable based on the foregoing analysis, there is no need to address the Taxpayer's argument that the sale of the Lab represents the sale of a separate division qualifying for the occasional sale exemption.
Refund
The Taxpayer requests a refund of the sales tax remitted to the Department should the sale at issue be determined to be an occasional sale.
Virginia Code § 58.1-625 C states that "Any dealer collecting the sales or use tax on transactions exempt or not taxable under this chapter shall transmit to the Tax Commissioner such erroneously or illegally collected tax unless or until he can affirmatively show that the tax has since been refunded to the purchaser or credited to his account."
Title 23 VAC 10-210-3040 states:
A dealer may request a refund for taxes erroneously or illegally collected. The dealer must show that the tax erroneously or illegally collected was paid by him and not passed on to the consumer, or the tax was collected from the consumer as tax and subsequently refunded to the consumer. Refunds cannot be authorized unless the request is made within three years from the due date of the return. The amount refunded will be the net amount of state and local tax remitted to the state on the transaction(s) generating the refund. Thus, if a dealer filed a timely return and deducted dealer's discount for the period for which the refund is claimed, the amount of refund will be reduced by the dealer's discount taken (3% of state tax).
As stated previously, the occasional sale exemption applies to the sale of the tangible personal property at issue. As such, the Taxpayer was not required to charge and collect the sales tax from the Buyer with respect to this transaction. A refund of the sales tax is due. However, in order for the Taxpayer to receive a refund of the sales tax remitted to the Department, the Taxpayer must demonstrate that the sales tax was refunded to the Buyer, and the Taxpayer must file an amended sales and use tax return for the refund period with the Department. The Taxpayer should contact the Department's Customer Services unit at (804) 367-8037 with any questions regarding this process.
The Code of Virginia sections, regulations and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's web site. If you have any questions about this response, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-5617686062.P