Tax Type
Retail Sales and Use Tax
Description
Failure to collect and remit sales tax on the sale on used and rental items
Topic
Accounting Periods and Methods
Collection of Delinquent Tax
Partnerships
Date Issued
12-27-1982
December 27, 1982
Re: § 58-1118 Application/Sales and Use Tax
Dear *************
This responds to your application on behalf of your client, **************** for correction of sales and use taxes assessed on June 13, 1979. The assessment outstanding is for $ ****** in tax, plus interest to date. No penalty is imposed.
ISSUES
The Department audited the ******* owned by the partnership composed of ********* and ******** for the period December 1, 1975, through December 31, 1978, and on June 13, 1979, made an assessment of ********* in tax, plus interest, for failure to collect and remit sales tax on the sale of used television sets and a used piano and for failure to collect sales tax on conference room rentals.
The taxpayer claims exemption from collection of the taxes. The taxpayer claims the sales of the televisions and piano were occasional in nature and exempt from sales and use taxation under Regulation § 175(a)(1). Alternatively, the taxpayer contends that the sales of the television sets were made in a liquidation of the ************** and were thereby exempt from sales tax under § 1-75(a)(2) and (a)(3) of the Regulations. The taxpayer contends further that the conference room rentals are exempt under §§ 1-56 and 1-57 of the Regulations.
FACTS
1. Sale of Used Television Sets.
According to *************** letter to the State Tax Commissioner of April 17. 1979. 52 color television sets and stands were leased from ********** and used by the partnership at one of its businesses, the ********** in ***************. According to ********* letter to the Department dated July 20, 1981, the lease agreement was a purchase option agreement. When the was ****** foreclosed on by the *************** the third party purchaser at the Trustees' sale did not wish to assume the lease on the television sets. A purchase of the sets was transacted between ********* and the partnership. The partnership paid $ ******* in sales tax on the purchase price. The partnership then proceeded to either use the sets in its ******* or sell them individually to consumers. No sales tax was collected on these sales. The sales were recorded by the partnership on the books of its ********* not the books of the which was sold by the Trustees to a third party.
2. Sale of Used Piano
According to ******** letter to the State Tax Commissioner of April 7, 1979, the partnership Purchased a piano in 1972 as part of the purchase of the ********* and Restaurant and furnishings therein. When the partnership later sold the piano to a consumer, no sales tax was collected.
3. Rental of Conference Rooms
The ******** and Restaurant rented its conference rooms to individuals and firms who used them primarily in sales promotion and development. No lease agreements were executed. No sales and use tax was collected from the Purchasers.
DETERMINATION
1. Sales of Television Sets.
Sales Not Part of Foreclosure Sale.
The foreclosure action against the partnership *********** by *********** does not qualify the partnership's sales of television sets, not part of the foreclosure sale, for sales tax exemption under § 58-441.6(m) of the Code or Regulation § 1-75(a)(2) and (a) (3). Regulation §§ 1-75(a)(2) and (a)(3) are totally inapposite to the situation here. These sections exempt from sales tax a transaction between the owner-seller of a business and a purchaser involving a lump sum sale or exchange of substantially all the of personal property such as furnishings, equipment, machinery, etc.
Therefore, these sections exempted from the sales tax the lump sum sale of tangible personal property sold in the foreclosure sale of the *****************. The television sets were not part of that sale. They were purchased not from the Trustees under the deed of trust, nor by the purchaser of the Lodge, but were purchased from *********** in an entirely separate transaction by the partnership and then sold individually to consumers. That the sales were not part of the *****sale is evidenced by their being recorded by the partnership on the books of its ******** not on the books of the ********* that was sold to a third party by the Trustees. Hence, Regulation §§ 1-75(a)(2) and (a)(3) are not applicable to the sales of the televisions.
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- Partnership Was Registered Dealer.
In addition, it is important to remember that although most exemptions from the sales and use tax reflect substantive public policy, the occasional sale exemption is provided for the efficiency of tax administration since policing casual sales would be an extremely difficult task. However, once a person or concern registers with the Department for collection of the tax, the reason for an occasional sale exemption no longer exists.
The Department has consistently taken the position that, under § 58-441.6(m) and Regulation § 1-75(a)(1), it is not possible for persons or concerns subject to the sales tax registration requirements to make an occasional sale, unless it is a lump sum sale of substantially all the assets of the dealer. Furthermore, Regulation § 1-75(b) specifically negates any exemption that may be applied for on the grounds that an article may be of a different class of merchandise from that which the dealer regularly sells. Since the ******** partnership was registered for collection of the tax at the time of the sales of the television sets, the sets were property held by the dealer "in the course of an activity" for which it was required to be registered. The transactions, therefore, do not qualify for exemption as occasional sales.
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- Same Transaction Not Taxed Twice.
Double taxation of the same transaction is prohibited by § 58441.5(d) which provides that "[a] transaction taxed under § 58441.4 shall not also be taxed under this section, nor shall the same transaction be taxed more than once under either section." [Emphasis added.] There is no double taxation in this case since two separate and distinct transactions are involved with respect to each television set, the first being the purchase by the partnership and the second being the sale to another consumer.
2 Sale of Piano.
As with the sales of the television sets, the sale of the piano 'cannot be exempt as an occasional sale since under § 58-441.6(m) and Regulation §§ 1-75(a)(1) and (b), the sale is not exempt if the property was "held or used by a seller in the course of an activity" for which he is required to be registered. Since the partnership was required to be registered for collection of the sales tax at the time of the sale of the piano, and the piano was held in the course of the activity requiring the registration, the sale is not exempt.
3. Conference Room Rentals
As a registered motel dealer, the rentals of conference rooms are subject to the sales tax under Regulation § 1-48, pursuant to § 58441.2(d) of the Code. The Regulation states that "[t]he tax applies to the sale or charge for any accommodations furnished to transients by any hotel, motel, inn .... or similar place."
Since enactment of the Retail Sales and Use Tax Act in 1966, the Department has consistently held that hotel and motel meeting rooms and ballrooms were within the legislature's intended meaning of "accommodations furnished to transients." The last sentence of § 58-441.2(d) clearly evidences our interpretation of "transient." Since that section states that "[t]he tax shall not apply, however, to ... accommodations supplied for a period of ninety continuous days or more," it follows that if the accommodations are furnished for fewer than ninety continuous days, the buyer is a "transient." Webster's defines "accommodations" as "something supplied for convenience or to satisfy a need." It has been our opinion that it is a typical "accommodation" in hotels and motels throughout Virginia to provide conference facilities of varying types. When a charge is made for use of such accommodations in a hotel or motel, it is taxable.
Based on the foregoing, I am unable to recognize any grounds for relief from the assessment, therefore, I must deny your application for correction. The tax of $ ******** plus accrued interest, should be paid immediately.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner