March 30, 2026
RE: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of the ***** (the “Agency”) requesting a ruling on the applicability of the occasional sale exemption to the sale of service handguns and service animals to retiring officers.
FACTS
The Agency, a Virginia police department, conducts restricted sales of tangible personal property. Virginia Code § 59.1-148.3 permits police departments to sell service firearms to retiring officers. Similarly, Virginia Code § 2.2-1124 B 8 permits police departments to sell a police service animal to its last handler. The Agency states that it is unable to forecast the number or frequency of such sales in any given year. The Agency asks if the occasional sale exemption is applicable to these sales.
RULING
Sales by Government Agencies
Unless otherwise exempt, Title 23 of the Virginia Administrative Code (VAC) 10-210-691 A provides, “sales by the Commonwealth, its agencies and political subdivisions generally are taxable.” The regulation goes on to state that “any state agency or locality making sales of tangible personal property not otherwise exempt shall register as a dealer with the department and collect and remit the sales tax on its sales.” See Title 23 VAC 10-210-691 A. Sales of confiscated and other items of tangible personal property by law-enforcement agencies are taxable. See Title 23 VAC 10-210-691 C. Service firearms and animals would be included in other tangible personal property.
Occasional Sale Exemption
The Code of Virginia exempts from the sales and use tax an occasional sale. See Virginia Code § 58.1-609.10 2. Virginia Code § 58.1-602 defines occasional sale as:
A sale of tangible personal property not held or used by a seller in the course of an activity for which it 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 that 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.
Title 23 VAC 10-210-1080 interprets the occasional sale exemption to include four scenarios, two of which are potentially relevant to this request: 1) “a sale by a person who is engaged in sales on three or fewer separate occasions within one calendar year,” and 2) “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 from the merchandise the dealer regularly sells.
The second scenario could be relevant if the Agency already possesses a certificate of registration to collect and pay sales tax on sales attributable to other business activities. This scenario differentiates between sales of items that are not related to such other business activities and those that are. The two examples given in the regulation illustrate the distinction:
Example 1: If Company A, which holds a certificate of registration only for retail sales made in its employee cafeteria, sells one piece of computer equipment, such transaction will be deemed an occasional sale since the computer is not property used in the cafeteria, which is the activity for which A is required to hold a certificate of registration.
Example 2: If Company B, which operates a hotel and holds a certificate of registration for collecting tax on room rentals, sells beds and mattresses used in the hotel, the occasional sale exemption is inapplicable since the property being sold is being used in the activity for which B is required to hold a certificate of registration.
Assume the Agency operated an employee cafeteria and held a certification of registration like Company A in Example 1 above. The sale of one firearm or one animal would be deemed an occasional sale because neither the firearm or animal would be considered property held or used by the Agency in the course of conducting its cafeteria sales. In contrast, if the Agency sold cups, trays, or other items it used in the cafeteria, such sales would not qualify for the occasional sale exemption, even if only one item was sold.
This second scenario described by 23 VAC 10-210-1080 B 2, however, does not preclude the possibility that sales of firearms and animals could themselves be of sufficient number, scope, and character to be considered taxable transactions, regardless of whether or not the Agency already possessed a certificate of registration. It does not appear that the Agency already possesses a certificate of registration for sales activities to which the sales of firearms or animals at issue could be related. If it did, then the sales would not be exempt regardless of the quantities involved, as in Example 2 above. In the Department’s opinion, therefore, the question again returns to the three or fewer frequency standard set under the first scenario. See 23 VAC 10-210-1080 B 1. This analysis is consistent with the statutory definition of “occasional sale” under Virginia Code 58.1-602 in that sales coming under the second regulatory scenario, as well as the third or fourth scenarios not at issue in this ruling, are only considered occasional sales, “provided that 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 supplied).
In Public Document (P.D.) 11-166 (9/27/2011), the Department was unable to determine the applicability of the “three or fewer separate occasions” part of the exemption to the sale of surplus equipment by a public school division because all other sales measures needed to be considered but were not provided. However, the Department also observed that if the taxpayer made sales on more than three occasions within one calendar year, the occasional sale exemption would not apply.
In this case, the Agency states that it is unable to forecast the number or frequency of sales in any given year. While the Department understands the practical issue involved, the Department encourages the Agency to make a good faith effort to anticipate the number of occasions that sales will occur and register if it appears likely that sales will be made on more than three occasions in the year.
This response is based on the facts provided as summarized above. Any change in the facts or introduction of new facts may lead to a different result.
The Code of Virginia sections and regulations cited are available online at law.lis.virginia.gov. The public document cited is available at tax.virginia.gov in the Laws, Rules & Decisions section of the Department’s website. If you have any questions regarding this ruling, you may contact ***** in the Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, at ***** or *****@tax.virginia.gov.
Sincerely,
Kristin L. Collins
Tax Commissioner
Commonwealth of Virginia
AR/4402.F